Qualities of Good Banking System

QUALITIES OF GOOD BANKING SYSTEM

Every bank is a dealer in money and credit. It generally deals in with others money and not with its own money. It takes deposits from the public and again lends to its customers for the sake of interest or profit.

Thus the operation of banking business is very risky one. A bank must have some qualities in operating its functions efficiently and successfully. The qualities of good banking may be summarized as below 

ADEQUATE CAPITAL:

A banker must have adequate amount of capital. A large-scale operation and execution of various functions of a modern bank require large amount of capital at the initial stage. Thus, without sufficient capital no large-scale banking can flourish.

GOOD REPUTATION:

Reputation is the most important factor in progress of a bank. To be successful, a bank must have good reputation in the money market. Reputation of a bank depends upon the qualifications of the directors and on the efficiency of management and workers.

LIQUIDITY:

Money which is dealt in by a bank is not its own, so a banker must always keep him ready to meet the claims of his depositors. He should keep sufficient amount of cash reserve and should keep some assets in such a way that these can be cashed at any moment. He should not block his fund by advancing loans for long periods rather he should always prefer short-term credits.

SECURITY AND SAFETY:

In respect of advancing loans, safety should b the main guiding principle for a bank. The loans advanced by the banker must be secured. The person, to whom the advance is to be made, must be studied carefully before the lending of money. According to R.S. Sayers, 

“The good banker is one who can distinguish the sound from the unsound borrower”.

ECONOMY:

Economy in expenditure should be maintained for the proper operation of banking business. A good banker will always try to maximize his profit at a minimum cost.

EFFECTIVE PUBLICITY:

A bank should adopt various scientific...