Characteristics of Good Banking System
Banking System of a country plays a
significant role in the process of its economic development. Therefore, it
becomes essential that a country must have a good banking system. Following are
the main features of a good banking system:
1) Suitable
to Economic Conditions: Banking system of a country should be according to the
requirement of its economic conditions.
2) Sound
Financial Base: A good banking system should have a sound financial basis.
Banks should have enough of minimum reserves to retain their credibility.
Credit-related risks should be minimized.
3) Mobilization
of Savings: A good banking system should be helpful in mobilization of savings.
People should be encouraged to save more, and should be invested in suitable
prospects.
4) Controlled
Credit: A good banking system should underline the importance of controlled
credit. The flow of credit is so channelized that it conforms to the
development needs on the nation.
5) Uniformity
of Policies: A good banking system should provide uniform policies according to
need and requirements of country. Uniform policies should be adopted across all
sectors of the economy.
6) Co-ordinated
System: A good banking system should be well co-ordinated system of banking.
There should be a healthy competition across different a banking institution
that only promotes the efficiency and productivity of the Banking System as a
whole.
7) Trained
and Progressive Administration: Trained and progressive administration is
another characteristic of a good banking system. Administration set up of the
banking structure must conform to the standard norms of efficiency and
productivity.
8) Modernization:
A good banking system should be exposed to modernization with a view to
stimulating dynamism in its functioning. It must be integrated with the banking
system of developed nations as a part of overall globalization of diverse
economic structure in different countries of the world.
Therefore, a good banking system should be
friendly to overall programmes of growth and development of a nation, and
should be modern as well as flexible to function as an integrated unit of the
global financial market structure.