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

  • Yield Interest Rate
    Yield Interest Rate is the actual rate of interest expressed as a rate percentage per annum relating to the net proceeds or outlay. This
  • Putable Swap
    A putable swap provides the party making the floating rate payments with right to terminate these swaps. A putable swap allows the ....
  • European terms
    European terms— foreign exchange quotations for the U.S. dollar, expressed as the number of non-U.S. currency units per U.S. dollar.
  • Institute Clauses
    Institute Clauses is standard international transport insurance clauses published by the Institute of London Underwriters. The Institute Cargo
  • Trust Deed (Settlement Deed, Declaration of Trust or Trust Instrument)
    Trust Deed (Settlement Deed, Declaration of Trust or Trust Instrument) is document that lays down the foundations of how the
  • Net working capital concept
    Net working capital is the current assets out of total current liabilities. It is used to measure the short-term liquidity of a business, and can also ...
  • Marketable securities
    Securities which are easy to sell on short notice in any time is called Marketable Securities.