Class 11 Finance Important Chapter 10 Banking System

Class 11 Finance Important Chapter 10 Banking System Solutions English Medium As Per AHSEC New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 11 Finance Important Solutions and select need one. AHSEC Class 11 Finance Additional Notes English Medium Download PDF. HS 1st Year Finance Important Solutions in English.

Class 11 Finance Important Chapter 10 Banking System

Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. ASSEB Class 11 Banking Additional Question Answer are part of All Subject Solutions. Here we have given HS 1st Year Banking Important Notes in English for All Chapters, You can practice these here.

Banking System

Chapter: 10

IMPORTANT QUESTION AND ANSWER

Answer the Following Question:

1. What is Branch Banking System?

Ans: Branch Banking System is a banking system where a single bank operates through a large network of branches spread across different locations under single ownership.

2. List two advantages of Unit Banking System.

Ans: Easy management and control; Quick decision-making due to localized operations.

3. What is Group Banking?

Ans: Group Banking is a system where two or more independent banks come under the control of a holding company, which may or may not be a banking company.

4. Explain one disadvantage of Branch Banking.

Ans: Branch banking may lead to concentration of economic power in the hands of a few big banks, causing monopoly.

5. How does Correspondent Banking System work?

Ans: Smaller unit banks keep cash reserves with bigger banks called correspondent banks, which help in fund transfers and provide banking support.

6. Compare and contrast Branch Banking and Unit Banking systems.

Ans: Branch Banking and Unit Banking are two distinct organizational structures of banking operations.

Branch Banking is a system in which a large bank operates through multiple branches spread across various regions and even countries. These branches are under the control of a central head office and operate under single ownership and management. For example, the State Bank of India operates thousands of branches across India and abroad.

Unit Banking, on the other hand, is a localized banking system where a bank operates through a single office or a few branches limited to a small geographic area. It is independently managed and has no connection with other banks.

Key Differences:

Branch banking enables economies of scale, diversification of risks, and wider banking coverage, while unit banking ensures quick decisions, personalized services, and satisfaction of local needs.

Branch banking involves complex management, whereas unit banking allows easy supervision.

However, unit banks are more vulnerable to financial crises due to their limited resources and restricted operations.

7. Discuss the advantages and disadvantages of the Chain Banking System.

Ans: Chain Banking System refers to a situation where two or more independent banks are controlled by a group of individuals, family members, or a single person without forming a holding company.

Advantages:

(i) Operational Autonomy: Each bank maintains its individual identity and carries out operations independently.

(ii) Shared Control: The controlling group can share policies, strategies, and resources informally, improving coordination.

(iii) Flexibility: This system offers more flexibility than formal group banking.

Disadvantages:

(i) Lack of Formal Control: The absence of a central holding company may lead to inefficient coordination.

(ii) No Specialization: The system lacks the benefit of specialized management, affecting the overall performance.

(iii) Limited Services: Chain banks cannot offer integrated or large-scale services like branch banks.

(iv) Risk Concentration: Since there’s no central monitoring system, poor performance of one bank may affect the reputation and confidence in the entire chain.

Chain banking was more common in earlier times in the U.S. and is now largely obsolete.

8. Explain the concept of Correspondent Banking System and its role in modern banking.

Ans: The Correspondent Banking System is a relationship-based banking model where small or unit banks maintain deposit accounts with larger banks, known as correspondent banks. The correspondent banks are usually located in major financial centers and provide various services on behalf of the smaller banks.

Functions:

(i) Funds Transfer: They help small banks remit or transfer funds on behalf of their customers.

(ii) Clearing Services: They clear checks and drafts drawn on other banks.

(iii) Foreign Exchange Services: Provide services related to international trade and currency exchange.

(iv) Credit Facility and Backup: Serve as a financial backup during short-term liquidity crises.

Importance:

Correspondent banking plays a critical role in expanding the reach of small banks, especially in remote areas. It ensures connectivity, financial stability, and efficiency for unit banks lacking resources for full-scale operations.

9. What are the key advantages and disadvantages of Group Banking System?

Ans: Group Banking is a system where two or more banks are brought under the control of a holding company. These banks may continue to operate as independent entities.

Advantages:

(i) Operational Efficiency: Shared knowledge and coordination among member banks increase efficiency.

(ii) Market Expansion: Smaller banks gain access to larger markets and customers.

(iii) Fund Mobility: Member banks can transfer resources to each other during financial crises.

(iv) Economies of Scale: Group banking facilitates large-scale operations and cost-effectiveness.

Disadvantages:

(i) Weak Managerial Control: The control is indirect and often ineffective due to flexible structures.

(ii) Mutual Dependence: Inefficiency or poor management in one bank may negatively affect others.

(iii) Limited Services: Compared to branch banking, group banking may offer limited services.

(iv) Poor Fund Mobilization: It lacks the fund mobilization capacity seen in centralized branch banks.

While group banking improves collaboration and resource-sharing, it cannot fully replace the scale and coordination benefits of branch banking.