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

  • Shiftability theory
    Shiftability theory is developed in 1918 by M.G Mouton and published on his article named ‘Commercial banking and capital formation.
  • Special drawing rights(SDRs)
    The financing by the IMF is measured in Special drawing rights(SDRs). The SDR is not a currency but simply a unit of account.
  • Available Balance
    Available Balance is the portion of a customer’s account balance having no restrictions from the bank and available for immediate withdrawals.
  • Currency Call Options
    A Currency call options grants the right to buy a specific currency at a designated price within a specific period of time. The price at which the owner is allowed to buy that currency is known as the exercise price or strike price, and there are monthly expiration dates for each option.
  • Call Date
    Call Date is date on which a bond may be redeemed before maturity at an option of the issuer.
  • Profit maximization
    Profit maximization means to increase profit of the firm.
  • Advance Clause Credit
    Advance Clause Credits are documentary credits incorporate a clause which authorises the advising bank to make an immediate payment to