Ancillary Services

Ancillary Services are the non-core, secondary services provided by banks, apart from their primary functions of accepting deposits and lending money.

These are essentially the “extra” services that help banks build stronger customer relationships and earn fee-based income, which is income generated without involving credit risk.

Key Ancillary Services Offered by Banks

1. Safe Deposit Lockers

  • What it is: Banks provide secure lockers to customers on a rental basis for the safekeeping of valuables like jewelry, documents, and other important items.
  • Relationship: In this case, the bank is the Lessor (one who gives on rent) and the customer is the Lessee (one who takes on rent). The relationship is that of a landlord and tenant.

2. Remittances (Fund Transfers)

  • What it is: Banks facilitate the transfer of money from one place to another and from one person to another on behalf of their customers.
  • Methods:
    • NEFT (National Electronic Funds Transfer): For transfers settled in hourly batches.
    • RTGS (Real-Time Gross Settlement): For high-value, real-time transfers.
    • IMPS (Immediate Payment Service): For instant, 24×7 transfers.
    • Demand Drafts (DDs): A pre-paid instrument used for transfers.

3. Bancassurance

  • What it is: The sale of insurance products through the bank’s distribution channels.
  • How it works: Banks act as corporate agents for insurance companies to sell life insurance and general insurance policies to their customer base.

4. Wealth Management and Advisory

  • What it is: Banks offer investment advisory services, especially to High Net-worth Individual (HNI) customers.
  • Services: This includes portfolio management, investment advice, and selling third-party products like mutual funds and bonds.

5. Bill Payments

  • What it is: Banks provide a platform for customers to pay their utility bills (like electricity, phone, and water bills), insurance premiums, and taxes through their branches or digital channels.

In essence, ancillary services have become a crucial part of modern banking, helping banks to diversify their revenue and deepen their relationship with customers by becoming a one-stop solution for all their financial needs.