Chapter 2: Retail Banking – Role within the Bank Operations (JAIIB – Paper 4)
1. In the retail banking business model, the primary source of income is:
A. Wholesale lending to corporates
B. Treasury trading activities
C. Government subsidies
D. Interest income and fee-based income from individual customers
Retail banking relies mainly on interest income from loans like housing, auto, and personal loans, along with fee income from services like credit cards, insurance, and remittances.
2. Which of the following is a key advantage of the retail banking model for banks?
A. Large-ticket lending reduces operational cost per loan
B. Diversified customer base reduces credit risk concentration
C. No requirement of branch network
D. Only short-term loans are given
In retail banking, the customer base is large and diversified, reducing risk of default concentration compared to wholesale lending.
3. A bank adopts a “fee-based retail business model.” Which of the following activities best reflects this approach?
A. Selling mutual funds and insurance products
B. Providing large infrastructure loans
C. Borrowing from RBI through repo
D. Holding SLR investments in G-Secs
Fee-based retail business models focus on earning commission from distribution of financial products such as insurance, mutual funds, and wealth advisory services.
4. Which statement best differentiates the retail banking model from corporate/wholesale banking?
A. Retail banking deals only with term loans
B. Corporate banking is free from credit risk
C. Retail banking focuses on large number of small-value transactions
D. Corporate banking requires no branch presence
Retail banking serves mass customers through multiple small-value products and transactions, unlike wholesale banking that focuses on large-ticket lending to fewer clients.
5. Case Study: A bank launches a mobile-only platform offering savings, payments, credit cards, and personal loans with minimal branch presence. This model is best described as:
A. Digital retail banking model
B. Wholesale banking model
C. Corporate relationship model
D. Priority sector lending model
Offering complete retail products through digital platforms with limited branches is a Digital Retail Banking Model.
6. Which of the following is a limitation of the retail banking business model?
A. High credit risk concentration
B. Dependence on a few large clients
C. High transaction costs due to large volume of small accounts
D. Requires no customer service infrastructure
Retail banking involves handling a large number of customers with small-value transactions, increasing administrative and transaction costs.
7. A retail bank focusing only on cross-selling of third-party products like insurance and mutual funds is mainly following which model?
A. Traditional branch model
B. Fee-based distribution model
C. Asset-based lending model
D. Wholesale relationship model
A fee-based distribution model relies on commissions and service charges earned from cross-selling third-party financial products.
8. Which among the following is NOT a typical retail banking product?
A. Home loans
B. Credit cards
C. Auto loans
D. Consortium finance for infrastructure projects
Consortium finance for infrastructure is part of corporate/wholesale banking, not retail banking.
9. A retail banking model that focuses on using ATMs, mobile banking, and internet banking instead of physical branches is best known as:
A. Direct banking model
B. Branch banking model
C. Corporate relationship model
D. Universal banking model
Direct banking model delivers products through digital channels like ATMs, mobile, and internet without relying heavily on physical branches.
10. Retail banking operations help in increasing bank stability because:
A. They eliminate credit risk completely
B. They depend only on large corporate accounts
C. They diversify risk across a wide customer base
D. They are free from regulatory requirements
Retail banking provides stability by spreading loans and deposits across a large number of customers, reducing risk concentration.
11. Which of the following is an example of a hybrid retail banking model?
A. Banks with only online presence
B. Banks using both branch banking and digital channels
C. Banks engaged only in government lending
D. Banks focusing only on corporate loans
Hybrid retail banking uses a mix of traditional branch banking and modern digital delivery channels for customer convenience.
12. In retail banking, CASA accounts are important because:
A. They provide low-cost funds to banks
B. They are high-interest fixed deposits
C. They are government-guaranteed bonds
D. They are only for NRIs
CASA (Current Account and Savings Account) balances provide banks with a stable and low-cost source of funds compared to term deposits.
13. Which among the following represents a cross-selling opportunity in retail banking?
A. Providing an education loan to a student
B. Providing working capital to a corporate client
C. Giving agriculture loan to a farmer
D. Selling a credit card to an existing savings account holder
Cross-selling in retail banking means offering additional financial products (like credit cards, insurance) to existing customers.
14. Which factor has contributed most to the rapid growth of retail banking in India?
A. Decline in literacy rates
B. Growth of middle class and rising disposable income
C. Restriction on private banks
D. Decline in technology use
Rising middle-class income, urbanization, and technology adoption have significantly boosted the demand for retail banking products in India.
15. Case Study: A bank launches "Express Loan" through a mobile app with instant sanction based on customer’s credit score and existing salary account. This is an example of:
A. Wholesale lending model
B. Traditional branch banking
C. Technology-driven retail banking model
D. Consortium lending
Instant sanction through mobile apps based on digital data and credit scores is part of a technology-driven retail banking model.
