In 1954 the Shroff committee recommended that the Indian Banks tin indirectly assistance industrial finance. The RBI has taken steps to improve the resources of the banking system. By amalgamation, the weaker banks were eliminated. In India, novel type of the banking has been developed, too the commercial banks confined themselves to brusk term lending.
Advantages of Mixed Banking System
The next are about of the major advantages of mixed banking system. :
- Expert Guidance : The industrial units financed past times the banks possess got the wages of receiving their goodness guidance on diverse fiscal issues. The banking concern helps the industrial co9ncerns inwards collecting large fiscal resources past times selling their stocks too shares to the public.
- Advice on Investments : Under mixed banking system, advises on amend the banks may rank investments too thence that the investors may survive benefited past times choosing amend investment opportunities.
- Credit Needs : Under the organisation the banks may rank both brusk term too long term finance, it tin satisfy the sum credit needs of the industry. They require non larn to other banks for the securing loans.
- Direct Contact amongst Industries : When banks render long-term finance, straight it tin appoint its official on the board of directors of the society too they possess got unopen intimacy amongst the company.
- Rapid Industrialization : In countries where exceptional industrial banks possess got non developed, mixed banking promotes rapid industrialization. Mixed banking has helped rapid evolution of industries inwards Germany.
Disadvantages of Mixed Banking System
The organisation of mixed banking also suffers from a few disadvantages. Those are,
- Bad debts : The organisation constitutes a serious threat to the stability of banks. If the industries endure losses due to depressive business, the profitability of the banks volition also have a setback, because the banks shall non survive able to recover their loans from the industries during low period.
- Speculative Business : During the smash catamenia the part values of companies volition survive going up. Banks engaged inwards mixed banking may survive tempted to indulge inwards speculative concern liek selling inwards society shares. If at that spot is a crash inwards the stock market, banks volition incur losses.
- Scope for over lending : When a banking concern gives long too short-term finance to industrial concerns it may leads to range for over lending.
- Threat to liquidity : The banking concern merchandise amongst short-term deposits payable on demand. It is non condom to lock upwards these resources inwards long-term loans. Long term financing is a threat to the liquidity of the banks.