Tuesday, April 12, 2016

Characteristics of a Good Banking System

Characteristics of Good Banking System
Banking System of a country plays a significant role in the process of its economic development. Therefore, it becomes essential that a country must have a good banking system. Following are the main features of a good banking system:
1)      Suitable to Economic Conditions: Banking system of a country should be according to the requirement of its economic conditions.
2)      Sound Financial Base: A good banking system should have a sound financial basis. Banks should have enough of minimum reserves to retain their credibility. Credit-related risks should be minimized.
3)      Mobilization of Savings: A good banking system should be helpful in mobilization of savings. People should be encouraged to save more, and should be invested in suitable prospects.
4)      Controlled Credit: A good banking system should underline the importance of controlled credit. The flow of credit is so channelized that it conforms to the development needs on the nation.
5)      Uniformity of Policies: A good banking system should provide uniform policies according to need and requirements of country. Uniform policies should be adopted across all sectors of the economy.
6)      Co-ordinated System: A good banking system should be well co-ordinated system of banking. There should be a healthy competition across different a banking institution that only promotes the efficiency and productivity of the Banking System as a whole.

7)      Trained and Progressive Administration: Trained and progressive administration is another characteristic of a good banking system. Administration set up of the banking structure must conform to the standard norms of efficiency and productivity.
8)      Modernization: A good banking system should be exposed to modernization with a view to stimulating dynamism in its functioning. It must be integrated with the banking system of developed nations as a part of overall globalization of diverse economic structure in different countries of the world.

Therefore, a good banking system should be friendly to overall programmes of growth and development of a nation, and should be modern as well as flexible to function as an integrated unit of the global financial market structure.