What is the Importance of Indigenous Bankers?

Owning to the dichotomy of structure of the money market in India, indigenous bankers occupy a unique position in the financial system of the country. The scope for the growth of indigenous banking is widening due to rural development and accelerated overall economic growth in the country.

There has been an increasing demand for credit and as the organised sector cannot adequately cope up with the situation, the demand for indigenous credit is likely to increase with the passage of time.

Drawbacks:

There are, however, certain defects in indigenous banking in India:

1. Indigenous bankers combine non-banking activities along with the banking business and commission agency. Many of them undertake speculative activities.

2. Most of them maintain a traditional system of accounts in their own language.

3. They do not pay the required attention to deposit banking.

4. They have failed to tap and mobilise rural savings effectively.

5. They are unorganised.

6. They hardly make any distinction between the purposes of borrowing and short-term and long- term finance.

7. They have no regular contact with the commercial banks.

8. They adopt a traditional accounting system in vernacular.

9. As compared to the organised financial agencies, they charge very high rates of interest for the loans.

10. They keep informal business relations.

11. Bulk of their business is based on cash transactions rather than on hundis.

The majority of them are conservative in approach and attitude. Despite these drawbacks, the role of indigenous bankers in India cannot be underestimated.