What are the merits and demerits of Consumer Banking industry in our society ? Has it been proved useful for every customer or not ?

Respected Madam

There    are two types of banks. Investment or corporate banks looking after industry needs and retail banks looking after the needs of the general public.

There are even more powerful banks like the central bank owned by a country’s government and regional banks like the Asian development bank and above all the World Bank and International Monetary Fund. But they would be out of our scope of interest.

·         Retail banks main customer base consists of common people.

·         They lend money at a higher rate compared to the interest rate offered on deposits.

·         There are different types of accounts like checking account in US , current account and savings account in South Asian region.

·         The rate of interest is controlled fully or to a certain extent by the central bank of the country. If inflation rate is high the central bank through CRR increases the interest rates so that people keep more money in bank. People have less money to spend and inflation rates come down to normal.

·         If there were no banks serving common people money lenders would charge very high rates of interest and common people would suffer.

·         There would be no credit cards no Automatic teller machine (ATM) no long distance transfer of funds without retail banking.

·         Common people would not have any avenue of SAFE deposits which would not be affected by the share market without retail banking.

·         There is just one disadvantage. If there is no completion among banks and the government does not have much control on the monopoly banker  the bank may raise its charges for debit and credit cards, check books and penalty for not keeping a minimum balance, penalty for early payment and late payment fees for loans etc to a very high level adversely affecting the general public.

·          Otherwise as banks become like a financial supermarkets giving all savings options from fixed deposits to mutual funds to life and health insurance they are a boon to the society. Just there should be some control and healthy competition.