Disadvantage of Universal Bank

Topics: Bank, Banking, Fractional-reserve banking Pages: 4 (1230 words) Published: September 15, 2009

Conflicts of interests between bank and investor: For banks savings deposits are a financing possibility at a favorable rate of interest; private investors, however, would usually prefer investments in securities to realize higher interest earnings.

Risk of concentration processes; but in spite of a decreasing number of banks, especially of private banks, neither a suppression strategy of big universal banks against smaller competitors nor a cartelization is to constate in the banking sector.

Potentials of influence: In particular big banks - as a result of their broad offer of financial products - are to be expected to have special influence possibilities on other economic subjects. But, whether this influence is brought to bear depends especially on the intensity of competition among the universal banks.


1. To meet with the increasing demands of customers.
The establishment of new private sector banks and foreign banks have rapidly changed the competitive landscape in the Indian consumer banking industry and placed greater demands on banks to gear themselves up to meet the increasing needs of customers. For the dissatisfied current day bank customers, it is not only relevant to offer a wide menu of services but also provide these in an increasingly efficient manner in terms of cost, time and convenience. E.g.: Today there is a lot of burden on staff members, they are given no or less number of bank holidays, the time limit is 8-8. 2. Merger with DFI {Biggest Challenge}.

Development Financial Institutions (DFIs) opting for conversion into Universal Banks by merger/reverse merger routes may also face certain difficult situations on account of Asset Liability Mismatches, burden of mounting NPAs and differences in regulatory prescriptions applicable to FIs and banks such as CRR and SLR requirements and priority sector lending. The asset profile of DFIs in India is predominately of...
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