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Banking and Insurance
Notes 4.13 Results of Implementing the Suggestions/Recommendations
Regarding the Structure of the Banking System
A restructuring of the banking system along the lines suggested in above paragraphs may result
in the following advantages:
1. Geographical specialisation by zonal banks would lead to compactness of branch network
and to better management and control. This would ensure better co-ordination without a
diffusion of responsibilities at local levels and ensure better and more intensive efforts at
the integrated development of the zone through priority sector lending and by active
participation in the implementation of the 20 point programme.
2. As the all India banks would confine themselves to metropolitan cities, urban areas, port
towns and free trade zones, where communication services are fairly good, the
responsiveness of these banks to the banking needs of the clientele in these areas would
improve.
3. Geographical specialisation by banks would automatically lead to their functional
specialisation to a large extent. In this process, the utilisation of skilled manpower will be
optimized and the quality of customer service will improve.
4. Owing to the built-in elasticity in geographical specialisation by banks, the customers
located in different areas will have a choice of two or more categories of banks and a
healthy competition within the banking system will prevail.
5. The administrative costs of banks would also be lower because of the geographical coverage
of their branch network, and control over branch operations by the respective central
managements would more effective.
For the success of the above scheme, a comprehensive review of the legislative enactments
applicable to the banking system in India may be undertaken so as to simplify the laws, wherever
possible. The loaning programmes of banks for the weaker sections of society would gain
further momentum if the legal formalities associated with documentation, creation of a charge
on security, recovery, etc., are simplified.
Task Discuss asset management at ABN Amro Bank.
Self Assessment
Fill in the blanks:
10. This is the revised RBI Guidelines for private banks as The bank should have a minimum
paid-up capital of Rs. ................crore to be raised to Rs. ........................ crore within three
years of the start of business.
11. ............................. specialisation by banks would automatically lead to their functional
specialisation to a large extent. In this process, the utilisation of skilled manpower will be
optimized and the quality of customer service will improve.
12. The Committee stipulates in ...............................through VI of the paper, principles for
banking supervisory authorities to apply in assessing bank's credit risk management
systems.
13. ...............................is the potential that a bank borrower or counterparty will fail to meet its
obligations in accordance with agreed terms.
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