A common perception is that commerce and retail are same thing since both are related to sale of goods. While both are actually related to sale, there is a big difference in both of them. While retail is defined as “selling of goods to public in small quantities for own consumption” the commerce is defined as “sale of goods in large quantities”. Let us look at the implication and understand the difference between retail lending and commercial lending.
As defined above the banking products that are targeted to serve individuals are tagged under retail lending. These products serve the purpose of meeting varied needs of individuals. From education to medical and buying various products. Generally these products get served through the branch network of a bank or through the sales force that focuses on contacting the customers qualifying on the bouquet of retail lending products as per the lending institutions’ norms.
This is actually corporate banking and is commonly addressed as commercial banking. Here the banks deal with the corporates to meet their varied needs. Also called business banking, this vertical deals with varied companies, from small enterprises headed by individuals to companies with presence in multiple countries. It therefore involves a highly evolved staff that can understand the requirements of business from small entities to conglomerates.
Retail lending products
Following is the list of retail lending products that meet the credit requirements of individuals for various purposes.
This loan product helps the property owners to raise funds against the existing house. The money can be utilized for various purposes without much restriction. Generally up to 60% of the existing property value gets funded as a loan
This is an unsecured loan that is underwritten based on the profile of customer. The profile includes, the repayment capacity and credit health. The proceeds of the loan can be used for any purpose. Personal loans are one of the most common forms of credit that are taken to bridge small term finance gaps
As the name suggests, the loan is given against the collateral of gold. Both ornaments or gold coins etc can be used to seek loan against the value. The loan is in general extended for up to 50% of the value of product
The loan is extended for purchase of both new and used car. The vehicle continues to be under hypothecation of the lending institution till the time complete loan amount is cleared
Shares and mutual funds can also be pledged to raise funds by the individuals. Normally 50% of share and equity fund value gets funded while the debt funds can garner up to 70% of the current value
The most popular form of credit used by large individuals helps one to purchase now and pay later. It also comes with host of other benefits and can be utilized for purchase of almost all kinds of services or products
Line against salary has two variants. First where a certain percentage of salary gets credited with a commitment of repayment on arrival of actual salary. Second, a line of credit up to the net monthly income also get extended with a longer period. The individual can continue to utilize the limit as and when required
A line of credit against FD is also provided by the bank. It can be up to 80% of the deposit amount and the interest could be 1 to 2% higher than the deposit rate
Consumer loans are extended to fund purchase of various items like electronic items, furniture etc
As the name goes, the loan is disbursed to help student cover the fee of education. There is a moratorium period till the student clears the course
Commercial banking products
The commercial banking products focus on meeting the complex requirements of the businesses and following is the list of some common product variations.
While the retail lending products’ underwriting take into account the financial strength of the prospective borrower along with the strength of the CIBIL score the commercial lending evaluates the business strength on various parameters and also considers the credit profile of the promoters and directors while underwriting.
Your email address will not be published. Required fields are marked *
Individuals love their credit cards, and the lifestyle it will probabl ...
Nice Article. There is always pros and cons of every aspect. Indian Cu ...
Thanks for finally writing about >Why Indian women fall short on cr ...
Daily Tips to stay Credit Healthy
© All Rights Reserved at Credit Sudhaar