WHOLESALE BANKING:
- Banks which provide banking services to larger customers like Mortgage banks, Commercial Banks, Large Corporations, Mid-sized Companies, Real Estate Developers and Investors, Institutional Customers and Government agencies.
- It is in contrast to Retail banking as it does not deal with individual clients and small business entities.
Wholesale Long Term finance banks (WLTF):
- RBI is contemplating to bring Wholesale Long Term finance banks (WLTF) to fund the large infrastructure projects.
- These banks will focus on lending to the corporate sector, small and medium businesses, and the infrastructure sector.
- They may also offer services in the area of Foreign Exchange and Trade Finance.
- Further, they can act as market makers in instruments like corporate bonds and credit derivatives.
- WLTF banks can raise funds through issuance of debt and equity.
Relevance of Wholesale Long Term finance banks (WLTF):
- Companies struggle to get long-term financing because of the underdeveloped corporate bond market. WLTF banks will promote Bond market.
- Being specialized institutions, they will be in a much better position compared with commercial banks in evaluating and funding long-term projects.
- Arrival of WLTF banks will reduce NPA risks for the Commercial Banks.
- Establishment of WLTF banks will also enhance competition, which will lead to more efficient allocation of
financial resources.
