Difference Between Corporate Banking and Private Banking (With Table)

Everyone is aware of the term Banking. But What is Banking, have you ever wondered? Well, Banking can be considered as a driver which drives the economy financially. For any economy in the world, Banking is very important. Banking means that it consists of cash, credit, all financial transactions. It is very important to maintain a balance between families, companies, states and nations.

Corporate Banking vs Private Banking

The difference between Corporate and Private Banking is that Private Banking is personal means it is for individuals. Whereas Corporate Banking is usually used by industries, organisations, companies, and it is meant for the corporate world. Private Banking contains all the entities that include the term banking.

Corporate Banking is the subsidiary of business banking. It is meant for the corporate world. It is the smaller version of the business world. It provides a lot of services like credit facility, treasury services, Fixed asset requirement financing services, Commercial Services, Employer services etc. It is a specialised form of commercial banks.

Private Banking was meant for individuals who have wealth in tremendous amount to manage their finances. It was ‘private’, so very different from retail and saving banks. Private Banking can be considered to be the pioneer on how banking originated. It provides financial services, investment, payments, brokerage, asset management to the customer on a personal level than on a huge level.

Comparison Table Between Corporate Banking and Private Banking

Parameter of ComparisonCorporate BankingPrivate Banking
DefinitionCorporate Banking is meant for companies and organizations etc.Private Banking is for individuals who have a high net worth income.
EstablishedIt was established in America after the second world war in the 1950s.It was established in Switzerland and UK in the year 1685.
Largest BankIndustrial and Commercial Bank of China is the largest corporate bank in the world.UBS Global Wealth Management is the largest private bank in the world.
Limit In Corporate Banking limit set to withdraw money is set by the particular company.The limit set here to withdraw money is usually less than almost 20 lakh per day. 
Roles & FunctionsIt provides credit & loan management, asset, cash management, capital formation, and other financial services.It provides banking, investment, tax management, perks, privacy, and high investment returns.

What is Corporate Banking?

Corporate Banking is a distinguished arm of Commercial banks. Now Corporate Banking has been quite popular in recent times. It specifically deals with business and companies. The work of Corporate Banking is to find solutions for businesses ranging from large to small. From a small grocery or Kirana stores to large industries, all the things or help are provided by Corporate Banking.

Corporate Banking was created to distinguish it from Investment Banking. The reason why it has become so important is the profit it gives to the banks. For Commercial banks, corporate banks are the highest source of income. For some, it is the key source of earning money. It is because corporate banking involves organisations or companies with large working capital.

Loans taken from the Corporate Banks are larger, and they give a higher rate of interest than regular loans. Corporate Banking, the term originated in the year 1933 in the United States of America. Corporate Banking is quite similar to Retail Banking. But the major difference between the two is the amount of money and profit involved in the former. 

Today in the modern world, Corporate Banking has become one of the largest contributors to the development and the growth of a company. With the fusion of technology, the banking industry has transformed and has become more productive and has become the means to fulfil the customer’s need and expectation. 

What is Private Banking?

Private Banking offers personalised financial services to HNWI clients ( High-Net-Worth Individuals) of retail banks. It offers the most common financial services like savings and checking accounts. Private Banking means that it will give you the personalised experience all the accounts of HNWI clients are handled by a Relationship Manager. A Relationship Manager plays a very crucial role.

Manager or Private Banker handles everything of a client from arranging a mortgage of a house to paying bills. Private Banking has a lot of advantages, like there are a variety of perks, privileges etc. One of the primary benefits being Privacy. All the dealings and services provided to the HNWI clients are confidential in nature. All the clients, depending on the needs they are offered preferences and discounts by the bank.

Due to the technological advancements, Private Banking is now provided on the Internet and mobile phones, and they also search for new markets according to the value proposition of clients. There is a total of 10largest private banks in the world according to 2019. 

Main Differences Between Corporate Banking and Private Banking

  1. Corporate Banking is meant for companies and organisations etc. It deals specifically with businesses. Private Banking is for individuals who have a high net worth income and gives personalised experience.
  2. Corporate Banking was established in America after the second world war in the 1950s. Corporate Banking was established in Switzerland and UK in the year 1685.
  3. Industrial and Commercial Bank of China is the largest Corporate Bank in the world.UBS Global Wealth Management is the largest Private Bank in the world.
  4. In Corporate Banking limit set to withdraw money is set according to the client. The limit set in Private Banking to withdraw money is usually less than almost 20 lakh per day. 
  5. Corporate Banking provides credit & loan management, asset and cash management, capital formation and other financial services. Private Banking provides savings, investment, tax management, perks, privacy and high investment returns.

Conclusion

Private Banking and Corporate Banking have now become popular trends. Private Banking is entirely dedicated towards individuals, entities etc. Private Banking sometimes encompasses all the three arms of banking like retail, corporate and HNWIs. Corporate Banking focuses mainly on corporate houses and sectors. It yields the highest profits for commercial banks.

Both are important cores of the banking world, and regardless of to say, there is high scope of both banking systems, whether it be private or corporate. With the rise of industries, companies and businesses demand Corporate Banking is much. In India, it is growing at the fastest rate if we analyse the current trends of the times.

References

  1. https://www.emerald.com/insight/content/doi/10.1108/02652329710175370/full/html
  2. https://books.google.com/books?hl=en&lr=&id=BGEAHREEXfoC&oi=fnd&pg=PR7&dq=Corporate+Banking+and+Private+Banking&ots=sj3FqrWB59&sig=vWhSdCmGqBz_0Srjjs0xUNPOqSc
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