Explain briefly the defects of indigenous banker
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The following defects are associated with the majority of indigenous bankers:
(1) They are a hindrance in the development of an organised money market in India. The Reserve Bank of India has no control over them.
(2) They follow old methods of business which are based on secrecy of accounts and activities. Accounts are mostly maintained in vernacular. They are neither audited nor published.
(3) They also provide loans for unproductive purposes.
(4) They combine banking with other activities which bring them more profits such as speculation, trading brokerage, etc.
(5) They charge very high rates of interest.
(6) They also indulge in some undesirable practices, such as manipulating accounts, deducting interest in advance, non-issue of receipts for payment of interest and principal, etc.
(7) They are unorganised except at a few places like Mumbai and Kolkata. This has hindered the mobility of funds.
(8) They do not work in co-operation with the commercial and cooperative banks. This has kept dichotomy in the Indian money market.
(9) They are unable to mobilise savings because they prefer giving loans than accepting deposits.
(10) Except in big towns, they have failed to develop the hundi (bill market) in trade and business. They do business in cash.
(11) They are not able to meet the financial needs of borrowers because they operate with insufficient capital.
(1) They are a hindrance in the development of an organised money market in India. The Reserve Bank of India has no control over them.
(2) They follow old methods of business which are based on secrecy of accounts and activities. Accounts are mostly maintained in vernacular. They are neither audited nor published.
(3) They also provide loans for unproductive purposes.
(4) They combine banking with other activities which bring them more profits such as speculation, trading brokerage, etc.
(5) They charge very high rates of interest.
(6) They also indulge in some undesirable practices, such as manipulating accounts, deducting interest in advance, non-issue of receipts for payment of interest and principal, etc.
(7) They are unorganised except at a few places like Mumbai and Kolkata. This has hindered the mobility of funds.
(8) They do not work in co-operation with the commercial and cooperative banks. This has kept dichotomy in the Indian money market.
(9) They are unable to mobilise savings because they prefer giving loans than accepting deposits.
(10) Except in big towns, they have failed to develop the hundi (bill market) in trade and business. They do business in cash.
(11) They are not able to meet the financial needs of borrowers because they operate with insufficient capital.
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Explanation:
The organisation and functioning of indigenous bankers suffer from the following defects:
Mixing Banking and non-Banking Business: ADVERTISEMENTS: ...
Un-organised Banking system: ...
Insufficient Capital: ...
Meagre Deposit Business: ...
Higher Interest Rates: ...
Defective Lending: ...
Unproductive Loans: ...
Secrecy of Accounts:
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