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:  Cite

More from this Section

  • Agency problem
    Agency problem means generally the contradiction of the owners goals with the management ...
  • Safekeeping
    Safekeeping is a bank’s practice of holding precious metals, securities, and other valuables ...
  • Bull Market
    Bull Market is a market in which prices keep rising ...
  • Asset/Liability Risk
    Asset/Liability Risk is a risk that current obligations/ liabilities cannot be met with ...
  • Financial Deepening
    Financial deepening as the parameter to determine the existence of financial intermediation ...