In order to manage our finances we look forward to a trustworthy banking network. This article attempts to provide some insight into the different banking systems and the various advantages and disadvantages.
Management of public funds is a huge task, which is usually undertaken by the banking systems. The widespread banking system can be subdivided into various categories-
- Commercial banking,
- Investment banking,
- Development banking,
- Insurance & many other financial activities.
As the name suggests, the Universal bank offers solutions to most of the fund management related queries – it includes – Merchant banking, Mutual funds, Factoring, Credit cards, Housing finances, Auto loans, Retail loans, Insurance, etc.
Advantages of Universal Banking
- One of the primary functions of Universal banking is to manage equity shares of many companies. Unlike other firms, Universal banks hold a special place within the investors’ group and investors’ have more faith in Universal banks than other firms.
- Universal banks have the reputation of offering higher output and lower costs with better product and quality service.
- Universal banks help the client take risks within their reach. Therefore, if the client is a high-risk taker, the Universal bank provides the client with investment options having high-risk quotient and vice-versa.
- Universal banks have a panel of experts to suggest solutions to individual clients with different enquiries.
- Universal banks operate along with several branches which serve the purpose of marketing (selling) of financial products and services of the clients. Due to their well-established brand name, they require less marketing efforts.
- For a client (or investor) who is looking for more than one investment option, Universal bank is the best solution, saving a lot of time and cost to the client.
Disadvantages of Universal Banking
- As Universal banking gives solution for all financial products and services, it also creates a lot of confusion as there are different rules and regulations for different investment options.
- Universal banking is usually done by large banks. And the downfall of such banks would automatically affect the entire banking community.
- Due to the huge spread of universal banks, they easily acquire he monopoly status and thus have a negative impact on other banks.
- As both commercial banking and investment banking are available under one roof within Universal banking, it may create a conflict between the two forms, thereby reducing the importance of either one of them.