1. Universal Banking
2. Characteristics of Universal Banking
3. Advantages of Universal Banking
4. Disadvantages of Universal Banking
Universal banking will be outlined as a banking industry that gives a large variety of banking and money services (like insurance, development banking, investment banking, industrial banking, and different money services) compared to ancient banking institutions; in easy terms, it may also be understood as a mix of all 3 services that’s retail banking, investment banking, and wholesale banking. This method offers services like quality management, deposits, payment process, investment informatory, underwriting, securities transactions, money analysis, bourgeois banking, factoring, mutual funds, credit cards, auto loans, insurance, housing finance, retail loans.
Under this sort of banking, a bank can handle assets demand yet as term loans for development activities. They will be addressing individual clients yet as massive company customers. They will have distended lines of business activities combining the functions of ancient deposit-taking, modern money services, selling long-term saving merchandise, insurance cowl, investment banking, etc.
Characteristics of Universal Banking
The heavily rely on 2 most vital factors square measure as follows
• The specific country’s diversification rules and rules.
• The strengths of individual banks in enlarging the scope of the activities within the varied segments of the monetary services business.
Universal Banking outlined Universal banking refers to the combos of business banking and investment banking together with securities business.
• Universal Banking is defined as (Saunders, Anthony. A, and Walter Ingo, 1994) “the conduct of vary of monetary services comprising deposit-taking and loaning, the mercantilism of monetary instruments and exchange (and their derivatives) underwriting of latest debt and equity problems, brokerage investment management and insurance”.
• Universal banking helps service suppliers to create semi permanent relationships with purchasers by occupation to their completely different wants. The consumer conjointly edges as he gets a full vary of services at a lower price and below one roof
Advantages of Universal Banking
- Economics of scale: Universal banking lead to bigger economic potency within the style of low price, higher output, and higher merchandise. In India, run batted in is in favor of universal banking as a result of it lead to economic science of scale.
- Profitable Diversions: The banks will utilize their existing talent in a single form of money services in giving other forms by diversifying the activities. Therefore, it involves lower price in playacting all kinds of monetary functions by one unit rather than the different establishment.
- Resources Utilization: A bank possesses all kinds of data regarding the prevailing clients which might be utilized to perform different money activities with a similar customer.
- Easy Marketing: A bank with the established name will simply use its existing branches and employees to sell the opposite money merchandise like insurance policies, investment trust plans while not defraying abundant effort on selling.
- One-stop Shopping: One-stop searching is useful for the bank and its customers because it saves a ton of dealing prices by increasing the speed of economic activities.
- Under one roof: Universal banking offers all money merchandise and services below one roof. It saves dealing price and time. It conjointly increases the speed of labor. Hence it’s useful to the bank yet as a client.
- Investors trust: Universal banks hold equity shares of the many firms. These firms will simply get investors from the public to take a position in their business. this can be thanks to different capitalists have full confidence and religion within the universal banks.
Disadvantages of Universal Banking
- No experience in future Lending: These square measure differing kinds of future loans like project finance and infrastructure finance, having long gestation comes cannot properly handled by the only bank.
- Non-Performing Assets problem: One of the foremost serious issues baby-faced by universal banking is Non-performing Assets.
- Risk of Failure: The larger the banks, the bigger the results of their failure on the system. The failure of a bigger establishment may have serious for the complete banking industry. If one universal bank were to collapse, it could lead to a general money crisis.
- Concentration of Monopoly Power within the Hands of Few Banker: Universal banking typically creates monopoly power within the hands of few massive bankers. Such a monopoly power within the hands of many massive bankers may be a supply of danger to the community whose goal may be a socialistic pattern of society.
- Bureaucratic and Inflexible: Universal banks tend to be officialdom and inflexible. They have a tendency to figure primarily with massive established customers and ignore or discourage smaller and recently established businesses.
- Different Rules and regulations: In offers all money product and services below one roof. However, all these merchandise and services got to follow completely different rules and regulations of run batted in, SEBI, IRDA. This produces several issues as a result of the same bank should follow completely different rules and regulations for various merchandise.
- Conflict of interest: Combining industrial and investment banking may result in a conflict of interest .some banks could provide additional importance to at least one variety of banking and fewer importance to a different one.