Universal Banking - Important Advantages Disadvantages

Universal Banking - Important Advantages Disadvantages

Universal Banking - Important Advantages Disadvantages

 Insurance in addition to many other fiscal activities Universal Banking - Meaning Advantages Disadvantages Universal Banking - Meaning


Universal banking is a combination of blogspot.com//search?q=commercial-banks-definitions-primary">Commercial banking, Investment banking, Development banking, Insurance in addition to many other fiscal activities. It is a house where all fiscal products are available nether i roof. So, a universal banking enterprise is a banking enterprise which offers commercial banking enterprise functions summation other functions such equally Merchant Banking, Mutual Funds, Factoring, Credit cards, Housing Finance, Auto loans, Retail loans, Insurance, etc.

blogspot.com//search?q=commercial-banks-definitions-primary">Narasimham Committee Report in addition to the S.H. Khan Committee Report. Both these reports advised to consolidate (bring together) the banking manufacture through mergers in addition to integration of fiscal activities. That is, they advised a combination of all banking in addition to fiscal activities. That is, they suggested a Universal banking.

In 2000, ICICI asked permission from blogspot.com//search?q=commercial-banks-definitions-primary">RBI to driblet dead a universal bank. RBI wants simply about large domestic fiscal institutions to driblet dead universal banks.


 Insurance in addition to many other fiscal activities Universal Banking - Meaning Advantages Disadvantages Advantages of Universal Banking


The benefits or advantages of universal banking are:-

  1. Investors' Trust : Universal banks concord stakes (equity shares) of many companies. These companies tin easily larn other investors to invest inward their business. This is because other investors possess got sum confidence in addition to faith inward the Universal banks. They know that the Universal banks volition closely sentry all the activities of the companies inward which they concord a stake.
  2. Economics of Scale : Universal banking results inward economical efficiency. That is, it results inward lower costs, higher output in addition to ameliorate products in addition to services. In India, RBI is inward favour of universal banking because it results inward economies of scale.
  3. Resource Utilisation : Universal banks utilisation their client's resources equally per the client's mightiness to accept a risk. If the customer has a high opportunity taking capacity in addition to hence the universal banking enterprise volition advise him to build risky investments in addition to non rubber investments. Similarly, clients alongside a depression opportunity taking capacity are advised to build rubber investments. Today, universal banks invest their client's coin inward dissimilar types of Mutual funds in addition to too straight into the portion market. They too produce equity research. So, they tin too grapple their client's portfolios (different investments) profitably.
  4. Profitable Diversification : Universal banks diversify their activities. So, they tin utilisation the same fiscal experts to furnish dissimilar fiscal services. This saves terms for the universal bank. Even the day-to-day expenses volition endure saved because all fiscal services are provided nether i roof, i.e. inward the same office.
  5. Easy Marketing : The universal banks tin easily marketplace (sell) all their fiscal products in addition to services through their many branches. They tin inquire their existing clients to purchase their other products in addition to services. This requires less marketing efforts because of their well-established build name. For e.g. ICICI may inquire their existing banking enterprise employment organisation human relationship holders inward all their branches, to accept family loans, insurance, to purchase their Mutual funds, etc. This is done really easily because they utilisation i build advert (ICICI) for all their fiscal products in addition to services.
  6. One-stop Shopping : Universal banking offers all fiscal products in addition to services nether i roof. One-stop shopping saves a lot of fourth dimension in addition to transaction costs. It too increases the speed or menses of work. So, one-stop shopping gives benefits to both banks in addition to their clients.

 Insurance in addition to many other fiscal activities Universal Banking - Meaning Advantages Disadvantages Disadvantages of Universal Banking


The limitations or disadvantages of universal banking are:-

  1. Different Rules in addition to Regulations : Universal banking offers all fiscal products in addition to services nether i roof. However, all these products in addition to services possess got to follow dissimilar rules in addition to regulations. This creates many problems. For e.g. Mutual Funds, Insurance, Home Loans, etc. possess got to follow dissimilar sets of rules in addition to regulations, but they are provided past times the same bank.
  2. Effect of failure on Banking System : Universal banking is done past times really large banks. If these huge banks fail, in addition to hence it volition possess got a really large in addition to bad number on the banking organisation in addition to the confidence of the public. For e.g. Recently, Lehman Brothers a really large universal banking enterprise failed. It had really bad effects inward the USA, Europe in addition to fifty-fifty inward India.
  3. Monopoly : Universal banks are really large. So, they tin easily larn monopoly mightiness inward the market. This volition possess got many harmful effects on the other banks in addition to the public. This is too harmful to economical evolution of the country.
  4. Conflict of Interest : Combining commercial in addition to blogspot.com//search?q=commercial-banks-definitions-primary">investment banking tin termination inward conflict of interest. That is, Commercial banking versus Investment banking. Some banks may laissez passer on to a greater extent than importance to i type of banking in addition to laissez passer on less importance to the other type of banking. However, this does non build commercial sense.
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