Which type of banking system exists in India?

  1. Free banking
  2. Dual banking
  3. Branch banking
  4. Unit banking

Answer (Detailed Solution Below)

Option 3 : Branch banking

Detailed Solution

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The correct answer is - Branch banking

Key Points

  • Branch banking
    • Branch banking refers to a banking system where a single bank operates multiple branches across different locations.
    • This system allows the bank to reach a larger customer base and provide services in multiple regions.
    • Branch banking promotes financial inclusion by making banking services accessible to rural and remote areas.
    • In India, most public and private sector banks operate under the branch banking system, including the State Bank of India (SBI), ICICI Bank, HDFC Bank, etc.
    • This system helps in the efficient management of resources and risk distribution across different branches.

Additional Information

  • Free banking
    • Free banking is a banking system where banks are minimally regulated, and there is no central bank to control the monetary policy.
    • This system was prevalent in the 19th century in some countries but is not commonly practiced today.
  • Dual banking
    • Dual banking refers to a system where two sets of banks operate simultaneously under different regulations, often seen in countries with both Islamic and conventional banks.
    • This system allows customers to choose between different banking principles and services.
  • Unit banking
    • Unit banking is a banking system where a bank operates only one branch or a single office, usually seen in smaller community banks.
    • This system is less common in large economies and is more prevalent in smaller towns or rural areas.
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