The
Definition Of

Group Banking

Group banking is a system where a group of banks are brought under the control of a holding company. The holding company controls the affairs of all units in the group. But each bank in the group maintains its separate identity. The purpose of group banking is to unify the management of banks, to achieve economies of large-scale operation and to grab more power.

Under group banking system, both banking and non-banking companies may become subsidiaries of a holding company.Banks acquired by holding companies are referred to as affiliated banks (subsidiary company).

The chief advantage of this system is that each bank need not carry large cash reserve; such cash reserves are concentrated in one or few member banks of the group. In times of need the bigger banks will help the smaller banks. Secondly, economies of large-scale production can be achieved by cutting down operating cost, by purchasing supplies in bulk and improving the efficiency of management.

 

Share it:

More from this Section

  • Derivative deposits
    Deposits created from different underlying transaction of bank is called derivative deposits. The prime underlying transaction includes ..
  • Inverted yield curve
    Inverted yield curve is a yield curve that is downward-sloping.
  • Flexible exchange rates
    Flexible exchange rates— the opposite of fixed exchange rates. The foreign exchange rate is adjusted periodically by the country’s monetary authorities in ...
  • Equity multiplier (EM)
    Equity multiplier (EM) is the amount of assets per dollar of equity capital.
  • Purchase-of-assets method
    Purchase-of-assets method is a method for completing a merger in which the acquiring institution buys all or a portion of the assets of the
  • Marginal lending rate
    Marginal lending rate is the interest rate charged by the European Central Bank for borrowing at its marginal lending facility.
  • Contagion
    Contagion is a form of financial panic, in which the devaluation of exchange rates by one country leads to similar devaluations at about the same time by ...