Know about the banking system
When you are investigating the flaws in the banking system the reasons are very transparent for such failures. In essence, the lack of regulatory supervision, lack of transparency, the susceptibility of public people to misuse poor oversight, and the ineptitude to learn from previous errors continue to add to the financial system’s woes. With the growing use of the Internet and development in the advanced technology systems globally, there has been an apparent increase in the usage of online banking systems across the world. Many banks provide their clients with personal loans, and the money can be used for any expense, such as paying a bill or buying a new television. These loans are usually unsecured. Before authorizing the personal loan sum, the lender or the bank requires certain documentation, such as proof of assets, proof of income, etc.
Do you know about the CIF number?
What is the CIF number? The Customer Information File (CIF) includes the account holder’s important banking information in a digital format. A unique number about every bank customer is allocated to every register. CIF is generally an 11-digit number or it can differ from bank to bank which gives the bank detailed information about a customer.
Why is the banking industry not learning?
The banking crisis is not a new phenomenon in financial history. The failures in the past didn’t have serious consequences due to the relatively limited size of the banks. The influence was confined to the various local areas that the cooperative banks represented, and, unlike today, the news would also be immune to public scrutiny.
The banking slumps date back to the 1900s when the banking industry soared rapidly. The overwhelming growth of entrepreneurship saw the major banks granting massive loans to powerful business magnates. The mushrooming banks faced a sad fate with the same problems of overextended balance sheets and accounting fraud. Inadequacy in detecting suspicious transactions, violation of standard operating systems, deceitful practices, dummy account operations and procedures by the board of committee appointed, the bank’s management are compelling reasons behind a scam of this magnitude.
Today’s Banks are seeking a solution for improving the balance sheet and liquidity, couldn’t assess the imminent catastrophe. The bank indicated that they are likely to be successful and gave false hopes assuring the situation was under control. There is a serious problem with the banking system that they do not use advance technology to secure their banking transaction.
Indulge in Speculation on Shares:
Many banks engage in share betting, misusing public deposits as a result. Several public sector banks and their subsidiaries are engaged in equity speculation in the form of mutual funds. During the entire episode, the recent securities scam involving many big businessmen and other brokers exposed the position of several public and private sector banks.
Social Banking is Insufficient:
It is true that even though a variety of systems have been in place to assist the poorer sections of Indian society. The banks predominantly cater to the corporate sector’s needs. Bank loans vary from medium to large-scale enterprises.
Grow nonperforming assets
Assets that are non-performing consist of:
· Suit-filed accounts, i.e. where proceedings for civil redress or restitution have been launched.
· Debts recalled
· Decreed debts, that is, where lawsuits have been filed and decrees have been obtained; and
· Debts graded as poor and questionable.
In the case of public sector banks, non-performing assets accounted for 9.36% of their gross advances for the year 2003.
Window-Dressing of Balance Sheets:
Despite mandatory bank audits, many banks are indulging in window-dressing their balance sheets. In recent times big businessmen falsely raise their deposits. This led to miss use of the money and can also hamper security.
Poor standard of portfolios of loans:
The efficiency of several banks’ loan portfolios is very poor. Sometimes, under international or political constraints, they advance loans. Without following the commercial procedure in granting loans, they extend letters of credit and guarantee limits as a regular matter.
Low profit
Banks have poor profitability in many countries. Their profitability has deteriorated as a result of irregularities and corruption in lending activities, misappropriation, fraud, increasing operating costs, etc.
Low capital base
The capital base of Indian banks was very poor in India and not standardized. In the case of 28 public sector banks, the capital base was the same as at the time of their nationalization. The required capital was related to their geographical position for private sector banks, while foreign banks operating in India were required to have foreign funds equal to 3.5% of the deposits deployed in Indian companies at the end of each year. Until March 1993, there was no weighted risk-asset ratio scheme for banks in India as a test of capital adequacy. In 2002-03, there were 2 commercial banks with a ratio of less than 9 percent.
The problem of advancing Loans and favoritism:
In advancing loans, some banks prefer those firms that are high profit earning. This is not just the case for banks in the public sector but also some government banks are responsible for the privatization of banks. Such loans also turn into bad debts, thereby undermining the financial condition of the banks concerned.
Dual Supervision:
The Indian banking system is subject to dual government and reserve bank regulation. It is over-administered and over-regulated. Credit decisions were subject to undue administrative and political pressures in particular cases and matters relating to internal management. You should very careful while spending your money in any bank so that you don’t need to regret it in the end in this one of the best business blogs.
Irregularities in Managing Accounts:
In running the accounts of customers, many banks resort to large-scale irregularities. Sometimes, one bank’s bad accounts are taken over by the other bank without sufficient review.
Banks not functioning efficiently
Many banks are functioning as sick units as a corollary. They are subsequently amalgamated, dissolved, or liquidated. Ten banks were amalgamated between1985-91. Three banks were dissolved as of June 30, 1991. The New Bank of India became so ill that it was merged in 1993 with the National Bank of Punjab. Three nationalized banks were sick also during 1999-2000.
