Indian bankers are playing a major part in the country's economic development. They served as the primary source of funding for farmers, merchants, business people, small industries, etc. And from what I know, it is when commercial banking was not yet evolved. This guide is all about the indigenous banking system.
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In an indigenous banking system, private individuals or companies perform the role of banks by providing deposit and loan services. Indigenous bankers offer these banking solutions. These local bankers often get mixed up with creditors, but they distinguish themselves clearly. While lending institutions offered loans but did not trade in "hundis". Native bankers gave loans but also accepted deposits and dealt in "hundis," which was utilised as a medium of trade. Now you know what is indigenous bank.
What is the importance of an indigenous bank?
The operations of indigenous bankers have decreased as a result of the nationalisation of commercial banks. And the expansion of banking into rural and urban regions. But their significance has not decreased due to the ongoing challenges that borrowers still experience in obtaining loans from banks.
They are approached personally and casually by the borrowers, who quickly and readily receive loans. They do not observe the protocols and processes that commercial banks use when making loans, nor do they have set hours for banking. Because of this, they continue to be well-liked by business people, farmers, traders, and regular citizens. They mostly provide loans for productive uses in order to help borrowers with their short-term and urgent demands. This tells you about what is indigenous banking system importance.
What are the indigenous bank’s flaws?
They prevent India from having developed structured financial markets. They are not under the authority of the Reserve Bank of India.
They continue to use outdated business practices that depend on keeping transactions and accounts private.
The majority of accounts are kept in a common language. They are not disclosed or inspected.
They also offer loans for wasteful activities.
They mix banking with other operations that increase their earnings, such as trade, gambling, and brokerage.
They have extremely high-interest rates.
I hope you understood the indigenous banking system concept now.
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What is indigenous bank?
Frank
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2022-08-22T20:14:57+00:00 2022-08-22T20:14:58+00:00Comment
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