“Star Limited expands – funded by INR 120 crore loan from XYZ bank!” We see such headlines often. Which division of a bank does such work? It’s the division called ‘Corporate Banking’. Continuing on the articles we’ve had so far (Chartered Accountants in Investment Banking and Chartered Accountants in Financial Services), let’s look at the roles in Corporate Banking, and where CAs best fit in.
Corporate Banking, also called Wholesale banking, covers a range of products and services offered to – you guessed it – Corporates, or businesses. Note that, very small businesses (proprietorships/small partnerships) are grouped under the Retail Bank, and SMEs may have their own business unit. Corporate banking customers generally start from a turnover of INR 500 crore upward.
What are the range of products and services that the Corporate Bank offers? Well, the main ones obviously, are loans – both short term and long term. Then, a bank facilitates export and imports for a corporate, through a sub-division called Trade Finance. A bank also offers services like Bank Guarantees and Cash Management. In Cash Management Services (‘CMS’), a bank manages a corporate’s receivables and payables. For example, a large telecom company has to manage bill payments across millions of customers. Its bank steps in to ensure various ways of collecting the payments and ensuring quick credit to the company’s account. Note that Trade Finance and Cash Management are together often called ‘Transaction Banking’.
Broadly, the services can be classified as ‘funded’ and ‘non-funded’ – that is, where a bank actually gives out money as in a loan, or gives a service as in a Bank Guarantee or CMS.
Note that, Retail Banking and Corporate Banking together form what is called ‘Core banking’ – that is, they form the main business of a large commercial bank.
So much for an overview of the activities in Corporate Banking. What are the main roles?
Here’s a brief:
a. Relationship Manager: As the title suggests, an RM is responsible for the revenues generated through the customer – She is the single point of contact between the corporate and the bank. She looks for various business opportunities – such as salary accounts from the employees, short and long term loans, cash management, etc. A person generally needs strong customer facing skills. While a CA would definitely fit in well here, it would not best utilize her analytical skills. Note that a fresher will not join as an RM for a large corporate, but would start off as a junior/assistant RM. However, she could be an RM for an SME (Small/Medium Enterprise).
b. Credit Analyst/Manager: Who is it, who evaluates the credit risk the bank takes on the customer? It is the Credit Manager. She visits the factory, meets the management, studies the industry and economic environment and also importantly, the past financials of the company. She then looks at the potential earnings and profits, basis her analysis of the company and economic environment. She then decides how much of a credit risk the bank can take on the customer, or whether it should take a risk at all. For example, one company may not get approved at all, while another may get a ‘limit’ of INR 50 crore. This can be used up in a variety of ways: a short term working capital facility of INR 10 crore, a bank guarantee of INR 5 crore, a medium term (2-3 year) loan of INR 15 crore, and so on. Here, we see that a Chartered Accountant’s rigorous analytical skills will be best utilized – also her strong foundation in financial statements is very valuable in understanding and interpreting them.
c. Product Managers – Trade Finance, Cash Management, etc.: You also have managers who understand each of the above products well. They work with the Relationship Manager to answer any customer queries and structure the product as per the customer’s requirement. Again, while a CA will fit in here well also, it’s not a complete utilization of her skills.
Corporate Banking is a stable and large part of the business of a bank. Every private sector bank is also focusing on the SME sector and hiring aggressively there.
Certifications in Corporate Banking are not common. The one which best fits the bill is FLIP’s Corporate Banking – Products and Credit Analysis. For Transaction Banking, while FLIP has a certification in Trade Finance & Cash Management Systems, The Indian Institute of Banking and Finance (www.iibf.org.in) offers one in Trade Finance.
I hope you found this helpful! I look forward to your comments.