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Characteristics of Stable Banking System:

Updated on February 13, 2012


Presence of stable banking system plays as important role in the economic development of any country as blood in human body. For rapid economic development and achievement of desired goals, it is essential that there should be a stable banking system in the country because an unstable banking system cannot fulfill the economic requirements of modern era in a batter way.

Characteristics of a stable banking system are discussed below:

  • Larger Capital

Availability of larger capital is an important and essential part of stable banking system because financial need of many sectors cannot be fulfilled without it.

  • Central Bank

Presence of such central institution is essential in a country which can act as “Hub” in money system so that the coordination in all the economic sectors of a country can be maintained according to the needs.

  • Financial Institutions

People should have the facility and direct access to the banks and other financial institutions. There should be a reasonable number of such institutions so that more and more people could get the privilege.

  • Professional Staff

It is essential that working staff of the banks and other financial institutions should be professional in their field, so that they can compete effectively with the requirements of modern time.

  • New Institutions

One of the characteristics of a stable banking system is that new financial institutions can be opened easily according to the rising needs of the economy.

  • Encouragement to Savings

In good banking system, banks offer profitable schemes to their customers, which encourage the general public to save money.

  • Loan Facility

Loan facility should be available with easy and workable conditions, so that all needy people can be benefited.

  • Increase In Production

In stable banking system, banks and other financial institutions prefer to grant loans for productive purposes, which results in higher production of the country.

  • Equal Distribution Of Wealth

Under stable banking system, most of the population in all parts of the country should have the facility of loan especially small traders and lower class should not be neglected.

  • Specialized Institutions

In stable banking system, there should be specialized financial institutions to meet the financial requirements of particular sectors

  • Monetary Policy

Application of effective monetary policy is essential in a stable banking system to control the volume of credit in country.

  • Trust of People

Complete trust of people is very much essential for strong and stable banking system, so that they can deal with the banks and financial institutions freely.

  • Free from Political Pressure

In any country all banks and other financial institutions should not be under the thumb of politics and they should work and grant loans according to their own opinion and need.

  • Implementation of Policies

If banking system follows the framed policies of government and central bank then it can work more effectively can show much progress.

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