The indigenous bankers occupy an important place in the Indian money market and play a vital role in financing the internal trade. They are especially popular in the areas, which lack joint stock banks or are not properly served by these banks. Although with the growth of joint stock banking in the country, the activities of the indigenous bankers have declined considerably, still these bankers have control over a good deal of financial business.
The popularity of indigenous bankers is mainly due to the following reasons:
(a) They provide prompt and flexible credit,
(b) They give loans to the small productive units not fully catered by the commercial banks,
(c) They have cordial relationship with the customers,
(d) They keep close contact with their customers and remain fully acquainted with their problems and financial requirements;
(e) They are not merely bankers to their customers, but are also their friends and advisers.
The main functions of the indigenous bankers are as follows:
1. Accepting Deposits:
The indigenous bankers accept deposits from the public. These deposits are of two types:
(a) the deposits which are repayable on demand and
(b) the deposits which are repayable after a fired period. The indigenous bankers pay higher rate of interest than that paid by the commercial banks.
2. Advancing Loans:
The indigenous bankers advance loans to their customers against all types of securities such as land, crops, gold and silver, etc. They also give credit against personal security. They provide loans to small industrialists who cannot fulfill the necessary loan conditions of commercial banks.
3. Business in Hundies:
The indigenous bankers deal in hundies. They write hundies, buy, and sell hundies. They also discount hundies and, thereby, meet the financial needs of the internal traders. They also transfer funds from one place to another through discounting of hundies.
4. Non-Banking Functions:
Most of the indigenous bankers also carry on their non-banking business along with the banking activities,
(a) They generally have their retail trading business,
(b) Sometimes, they act as agents to large commercial firms and earn income in the form of commission,
(c) They also participate in speculative activities.