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Sujai Adithya
Human Resource and Banking & Finance Expert
Asked a question last year

What is Wholesale Banking?

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Sujai Adithya
Human Resource and Banking & Finance Expert

Wholesale banking is the plan of services provided by banks to the corporations like mortgage brokers, big organizations, companies, real estate investors, international trade financiers, and institutional investors like government organizations.  

The financial services conveyed between financial service company and organizations like banks, insurance companies, and stockbrokers are known as wholesale banking. It occurs in the inter-bank market and comprises a huge amount of money. Wholesale banking services include the currency translation, operational financing, trading transactions and many other services. 

Wholesale banking targets big corporate house and big clients and the main purpose is to facilitate services to the corporate customers. The cost of deposit is very high because of huge deposit with the corporate house which means they have bargaining power. So, banks offer a high rate of interest in the wholesale banking to pull the fund. The number of branches in wholesale banking is less due to a narrow customer base which means high-value transaction but with low volume, and hence the operational cost is lower.

The main shortcoming of wholesale banking is the risk it professes to all clients. Bank has to be stable while dealing huge amount in a single investment. The business accounts are more expensive than the traditional bank accounts. Banks charge a high rate of interest for credit and the processing fees of the banking transactions are also higher which differ from bank to bank. So it is not possible to compare it. Sometimes, it also happens that some services are not used by the client still they have to pay charges for it. The amount of money borrowed by the client in wholesale banking is huge which sometimes lead to exploitation of a client.

Wholesale banking refers to the complete banking solution provided by the merchant banks to the large scale buisness organizations and the government agencies or institutions. To avail the facility of wholesale banking, the companies need to possess a strong financial statement and operate on a large scale. Usually, multinational companies are the clients of wholesale banking.