Bank employees develop the habit of saving something for their difficult times. When they find that the bank balances of petty shop-keepers are swelling up, they feel the urge to save some amount of money.
Tag Archives | banking
One of the major considerations that led to the nationalization of the fourteen major commercial banks of India in 1969 was the fact that banks, in general, had been negligent of the vital priority sectors of the economy, viz., agriculture and small-scale industries.
Central banking is a recent phenomenon mainly related to 19th and 20th centuries, although certain central banking functions were performed by certain institutions in the olden days. The growth of central banks has been very slow. The Riks Bank of Sweden is the earliest bank established in 1656.
Under unit banking, the bank operations are highly localised. Therefore, there is little possibility of distribution and diversification of risks in various areas and industries. Limited resources of the unit banks also restrict their ability to face financial crisis. These banks are not in a position to stand a sudden rush of withdrawals.
Unit banking is localized banking. The unit bank has the specialised knowledge of the local problems and serves the requirements of the local people in a better manner than branch banking. The funds of the locality are utilised for the local development and are not transferred to other areas.
Under branch banking system, the financial resources collected in the smaller and backward regions are transferred to the bigger industrial centres. This encourages regional imbalances in the country. Under branch banking system, the losses and weaknesses of some branches also have their effect on other branches of the bank.
Rapid growth and wide popularity of branch banking system in the 20th century are due to various advantages as discussed below. Large financial resources and wider geographical coverage increases public confidence in the banking system.
A sound and efficient banking system, which undertakes the responsibility of promoting economic growth in underdeveloped economies, must possess the following features: