Overview Of Universal Banking

Table of Contents

Overview Of Universal Banking

In general perception, the term Universal Banking refers to a financial institution offering commercial as well as investment banking services which also include services related to savings, loans, and investments. But in real practice, institutions which offer a wide range of financial services, beyond commercial banking and investment and investment banking and various other activities including insurance are regarded as universal banking. To study the products and services offered by the universal bank, To study the universal banking coupled with SWOT, To study RBI guidelines for existing bank/FIs for conversion into the universal bank and To study the issues and challenges face in the universal banking, etc. These are the area which covers in a project.

It is a well-known fact that economic growths imply a long term rise in per capita national output and such increases are very much associated with drastic and extraordinary changes in technology, institutional setup, psychological environment, organizations behavior, socio-culture and attitude of common people. For social development economic growth is necessary and for economic growth industrialization is necessary and for industrial growth efforts, capital and knowledge are three important elements and among this element capital is the most crucial component. However, metamorphic environmental developments in and outside the political boundary and the open market policy with the hedges cocooning the economy has been abolished by the computer and telecommunication revolution. Net communications have explored the geographical and functional integration of international financial markets. Further, deregulation of financial market and intensified competition among banks and nonbanking financial intermediaries have minimized the hurdles between money and capital markets and explored more diversified, organized, multipurpose and innovative financial institutions functioning in unprecedented dimensions.

It has been found that a wide spectrum of financial intermediaries in money market and capital markets under the supervision and guidelines of central banks as an apex body has come into existence across the world to fulfill varied requirements of savers and investors. Notable agencies among money market institutions engaged principally in providing term financing to investors and entrepreneurs are commercial banks, discount houses, acceptance houses, and indigenous agencies and among capital market institutions, insurance companies, venture capitalists, vulture funds, mutual funds, investment banking, development banking, virtual banking, merchant banking, mutual banking, and universal banking.

In general perception, the term Universal Banking refers to a financial institution offering commercial as well as investment banking services which also include services related to savings, loans, and investments. But in real practice, institutions which offer a wide range of financial services, beyond commercial banking and investment and investment banking and various other activities including insurance are regarded as universal banking. It is like a coordinated financial supermarket supplying innovative and multifarious products under one roof. It is one spot ultimate shopping place for a customer who is willing to deal with several financial products. It combines the complexities of investment banking with simpler commercial banking services for individual and companies. In the present global scenario, universal banking concept is an innovative high breed banking option and its pronounced business largely emphasizes in terms of products, customer groups, and

regional activities. According to the World Bank, “in Universal Banking, large banks operate an extensive network of branches, provide many different services, hold several claims on firms (including equity and debt) and participate directly in the Comparative Governance of the firms that rely on the banks for funding or as insurance underwriters”.

Globally universal banking is functioning in various forms ‘like’ In House fully integrated universal banking which is known as the purest form of universal banking. In this form of UB single institution offers a complete range of banking and other products to the customer. Under this form bank’s different departments operate under one roof and perform various activities like commercial banking, investment banking, insurance, leasing, etc. in order to satisfy the consumer need. Under Universal Banking Subsidiary Structure form of UB, there exists a network of principal institution and subsidiaries. In general principal institution undertakes both banking and investment activities and for remaining activities subsidiaries are set up by the bank and in Holding Company structure form of UB one financial holding company owns both banking and nonbanking subsidiaries which are legally separate and individually capitalized and are allowed by the law.