Here is What You Need to Know About Corporate Banking, its Products, and Services

Banking is not a new term for anyone be it business personnel or a homemaker. Banks are the backbone of an economy. They take care of the finances of the country in both cash and credit.

Banks are financial institutions that accept deposits, grant credits, and manage the risks associated with holding various forms of wealth. They play a major role in the economy of a country therefore they have regulatory bodies. In most countries, banks are regulated by a central bank or the national government. In India, the Reserve Bank of India (RBI) is the apex body that regulates the monetary policy in the country. It governs and monitors the strict regulations implemented on banks across India.

The majority of a bank’s revenue is generated from interest on loans, consumer lending, money deposits, share equity debts and other such services called the transaction revenue. The term refers to income earned in exchange for products, services, or assets for cash or credit.

Banks Are Classified Into Two Main Categories:

1. Scheduled Banks
2. Non-scheduled Banks

Scheduled Banks are again classified into two namely, Commercial Banks and Co-operative Banks. Commercial Banks comprise Regional Rural Banks, Small Finance Banks, Foreign Banks, Private Sector Banks, and Public Sector Banks. Co-operative Banks are categorized into Urban and Rural Banks.

Payments Banks have been newly introduced.

Based on the types of banks and the products and services offered by them, they can be classified in four ways as banking industry sectors.

• Retail Banking
• Commercial Banking
• Corporate Banking
• Private Banking

This classification is based on their clientele and the amount of money they deal in.

Corporate Banking

Corporate banking also known as business banking or wholesale banking serves a diverse range of clients from small and mid-sized businesses to large conglomerates. It offers the corporates several services including credit, cash and asset management, trade finance, real estate, treasury management, loans, and underwriting, etc.

Corporate banking is the key profit center for most banks. The organization can yield higher profits because of the large sums of money loaned to the corporates and the higher interest received. Hence, corporate banking salary is higher than others.

ICICI Bank defines Corporate Banking as, “They offer corporates a wide range of products and services, the technologies to leverage them anytime, anywhere and the expertise to customize them to client-specific requirements. From cash management to corporate finance, from forex to acquisition financing; they provide you with end-to-end services for all your banking needs.”

Key Segments Of The Corporate Banking Industry Are:

• Deposit-taking institutions
• Mortgage firms
• Central banks, regulators, and monetary authorities
• Non-banking financial institutions
• Brokerage firms
• Financial Technology (FinTech)

Corporate Banking Products And Services

Personal loan, automobile loan, home loan, business loan, gold loan, current/savings account, fixed deposit, internet/mobile banking, debit/credit cards and customer care are some of the services provided by the banks in general. Banks approve loans based on the credit scoring system.

Corporate Banking Offers The Following Products And Services To Corporate And Other Financial Institutions:

1. Credit Management

Loans and other credit services are offered to corporate customers. Credit facilities bring the largest share of profits for the corporate banks.  The interest rates imposed on them are significantly high because of the amount of risk prevalent in lending to corporations.

2. Treasury and Cash Management Services

Companies use treasury services to manage their working capital requirements. These kinds of services are particularly important for multinational companies as they facilitate currency conversion.

3. Equipment Lending

These are called fixed asset requirement financing services.  It is mainly for the corporates involved in capital-intensive industries such as information technology, transportation, and heavy machinery. Banks facilitate customized loans and lease agreements for the purchase of machine equipment.

4. Risk Management

Banks provide advisory and custodial financing to the clients to safeguard their assets, maximize liquidity, and manage risks.

5. ASI

Clients with high net worth use wealth management services for handling their finance and investments.

6. Employer Services

Corporate banks also provide employment services such as payroll, selection of retirement plans, and healthcare facilities.

7. Commercial Services

Banks also provide services like portfolio analysis, debt and equity restructuring, real assets analysis, leverage analysis, etc.

Some Other Services Offered By Corporate Banks Are:

• Overdraft Facility (OD)
• Asset Management
• Real Estate Commercial Services
• Trade Finance
• Underwriting Services
• Currency Exchange
• Mortgage Finance
• Fund Transfers/Remittances
• Bills and Receivable Discounting
• Online/Internet Banking Services
• Import/Export Bills of Collection
• Letter of Credit (LC)
• Letter of Guarantee on Shipment and Bill of Lading
• Insurance for Goods in Transit

Conclusion

Corporate banks are a primary source of finance accrual for entrepreneurial and industrial work. They provide a wide range of financial services to businesses. Hence, they’re crucial for domestic and international trade and commerce.

Corporate banking offers its services and products to small, medium, and large-sized businesses for its efficient functioning. Its main objective is to maintain the value of the currency, ensure price stability, promote the growth of financial institutions, and promote economic growth.

The financial banking industry is changing rapidly. It is welcoming the emerging technologies to build a secure and cost-effective environment for everyone.