Retail Banking & Wealth Management
What RBWM tests
Retail Banking & Wealth Management tests the products a branch sells - deposits, home, auto, personal, education and gold loans, cards, mutual funds and insurance - together with the advisory process behind them: suitability, risk profiling, asset allocation and tax.
Core rules
- Pricing. Retail floating-rate loans are benchmarked to an external benchmark (repo-linked EBLR) since October 2019; term deposit rates are card rates, with negotiated rates for bulk deposits.
- EMI. EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where r is the monthly rate and n the number of instalments. The EMI stays fixed, but the interest share falls and the principal share rises over the tenure.
- Credit appraisal. Banks test FOIR (EMIs as a share of income, commonly capped at 40–55%), credit score, LTV on secured loans and repayment track record.
- Wealth management. Advice must follow a documented risk profile; asset allocation across equity, debt, gold and cash drives most of the outcome; a SIP averages the purchase cost but does not remove market risk.
- Protection and tax. DICGC insures deposits up to ₹5 lakh per depositor per bank. Section 80C (₹1.5 lakh) and Section 24(b) home-loan interest (₹2 lakh, self-occupied) are available only under the old tax regime.
Worked example
Loan ₹10,00,000 at 9% for 20 years. r = 0.09/12 = 0.0075, n = 240, (1.0075)^240 ≈ 6.009. EMI = 10,00,000 × 0.0075 × 6.009 ÷ 5.009 ≈ ₹8,997. Total repayment = 8,997 × 240 ≈ ₹21.59 lakh, so interest ≈ ₹11.59 lakh. More than half the cost is interest, which is why tenure choice matters as much as the headline rate.
Traps
Quoting a flat rate as if it were reducing-balance (a 9% flat rate is roughly 16–17% effective); assuming DICGC cover is per branch or per account; promising SIP returns; and applying 80C or 24(b) deductions under the new tax regime.