Chapter 1: Retail Banking – Introduction (JAIIB – Paper 4)
1. Which of the following is a key characteristic of retail banking?
A. Large-value corporate loans
B. International syndicated lending
C. Dealing with large number of small-value transactions
D. Treasury operations
Retail banking is characterized by handling a large customer base with numerous small-value deposits, loans, and services.
2. Which of the following is an advantage of retail banking for banks?
A. Diversification of risk due to large number of small borrowers
B. Higher probability of large NPAs
C. Greater exposure to single borrower default
D. Heavy dependence on corporate sector
Since retail loans are spread across a wide customer base, the risk is diversified, making the portfolio more stable compared to corporate lending.
3. A student takes an education loan of ₹5 lakh from a bank. This is an example of:
A. Wholesale banking
B. Investment banking
C. Corporate banking
D. Retail banking
Education loans, housing loans, personal loans, and savings accounts are all examples of retail banking products offered to individuals.
4. Which of the following is NOT an advantage of retail banking?
A. Stable source of funds through savings and deposits
B. Heavy concentration of credit risk in one borrower
C. Better customer relationship management
D. Cross-selling opportunities of multiple products
Retail banking reduces concentration risk because exposure is spread across many customers, unlike corporate lending which may concentrate risk in few borrowers.
5. Which statement best explains the customer base in retail banking?
A. Limited to multinational corporations only
B. Restricted to government organizations
C. Composed of individuals and small businesses
D. Primarily large exporters and importers
Retail banking targets individual customers and small businesses, unlike wholesale or corporate banking which serves large firms.
6. Which of the following is a major constraint faced in retail banking?
A. Diversified customer base
B. Wide range of products
C. Low default risk
D. High operational cost due to large volume of transactions
Retail banking involves servicing millions of customers and small-value accounts, which increases operational and administrative costs.
7. A limitation of retail banking from the bank’s perspective is:
A. Difficulty in maintaining personal relationship with each customer
B. High exposure to one borrower
C. Dependence on international markets
D. Inability to mobilize deposits
Since retail banking deals with millions of small customers, it becomes challenging for banks to maintain personalized attention and service.
8. The initial phase of retail banking in India focused mainly on:
A. Internet banking and mobile apps
B. Wealth management and advisory services
C. Basic deposit products and branch banking
D. Fintech partnerships
In the early stages, retail banking in India revolved around savings accounts, fixed deposits, and basic loan products through physical branches.
9. Which development in the 1990s significantly accelerated the evolution of retail banking in India?
A. Introduction of barter trade
B. Economic liberalization and entry of private sector banks
C. Expansion of cooperative societies
D. Nationalization of banks
Liberalization in the 1990s allowed private and foreign banks to enter, bringing modern technology and products that transformed retail banking.
10. Which factor has most recently contributed to the rapid evolution of retail banking?
A. Digitalization and rise of fintech innovations
B. Dependence on barter systems
C. Exclusive focus on wholesale lending
D. Decline of technology usage
With internet banking, mobile apps, UPI, and fintech tie-ups, digitalization has become the latest driver in the evolution of retail banking.
11. Which of the following is a prerequisite for success in retail banking?
A. Dependence only on corporate clients
B. Strong customer relationship management (CRM)
C. Limiting use of technology
D. Concentration on a few large borrowers
Success in retail banking depends on building long-term customer relationships through efficient CRM and personalized service.
12. A key factor for success in modern retail banking is:
A. Avoiding digital channels
B. Relying only on physical branches
C. Effective use of technology and digital platforms
D. Focusing only on wholesale lending
Technology-driven services such as internet banking, mobile banking, and UPI are crucial for success in today’s competitive retail banking environment.
13. Why is risk management considered a prerequisite for success in retail banking?
A. It ensures credit quality across a large number of small borrowers
B. It eliminates the need for KYC norms
C. It allows banks to take unlimited risk
D. It reduces operational efficiency
Since retail banking involves millions of accounts, effective risk management is essential to maintain portfolio quality and reduce defaults.
14. Which of the following is MOST essential for cross-selling in retail banking?
A. Expanding only branch network
B. Reducing product range
C. Depending only on walk-in customers
D. Strong customer database and analytics
Cross-selling requires proper customer profiling and analytics so that the right product can be offered to the right customer at the right time.
15. One of the prerequisites for retail banking success is cost efficiency. How can banks achieve this?
A. Hiring more staff for every branch
B. Limiting automation
C. Leveraging technology like ATMs, mobile apps, and online banking
D. Focusing only on manual operations
Cost efficiency in retail banking comes from automation and digital services that reduce dependency on physical branches and manual processes.
16. Which of the following is a major challenge for retail banking?
A. Rising competition from fintech and digital players
B. Low customer expectations
C. Limited use of technology in society
D. Monopolistic banking market
Retail banks face tough competition from fintechs, payment banks, and digital wallets offering faster and cheaper services.
17. Cybersecurity has become a challenge for retail banking mainly because:
A. Customers prefer cash over digital payments
B. Banks avoid using mobile apps
C. There is no need for KYC in digital transactions
D. Increased use of online banking exposes banks to frauds and cyber risks
Digital adoption has increased cyber threats, making data security and fraud prevention a major challenge for retail banks.
18. Which factor is expected to shape the future of retail banking the most?
A. Decline in use of smartphones
B. Integration of Artificial Intelligence and Big Data
C. Elimination of all digital channels
D. Dependence only on manual processes
AI, data analytics, and machine learning will drive personalized banking, fraud detection, and product innovation in the future.
19. In future retail banking, customer expectations will mainly revolve around:
A. More paperwork in loan processing
B. Reduced use of technology
C. Seamless, 24x7 digital banking experience
D. Slower service for security reasons
Future customers expect fast, user-friendly, and always-available banking through digital platforms without visiting branches.
20. Which of the following trends will define the future of retail banking in India?
A. Declining focus on financial inclusion
B. Expansion of digital payments, UPI, and neobanks
C. Reduction in mobile penetration
D. Return to only branch-based banking
India’s retail banking future will be dominated by UPI growth, digital payments, and new-age banking models like neobanks.
