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By Ne. Thi. Somashekar

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There will be lack of control and therefore their rates of interest would differ widely from place to place. Moreover, transfer of funds will be difficult and costly. 3. Lack of Control: Since the number of unit banks is very large, their co-ordination and control would become very difficult. 4. Risks of Bank’s Failure: Unit banks are more exposed to closure risks. Bigger unit can compensate their losses at some branches against profits at the others. This is not possible in case of smaller banks.

7. Development of Agriculture: Underdeveloped economies are primarily agricultural economies. Majority of the population in these economies live in rural areas. Therefore, economic development in these economies requires the development of agriculture and small scale industries in rural areas. So far banks in underdeveloped countries have been paying more attention to trade and commerce and have almost neglected agriculture and industry. Banks must provide loans to agriculture for development and modernisation of agriculture.

6. Promoter of Economic Development: In developing economies the central bank has to play a very important part in the economic development of the country. Its monetary policy is carried out with the object of serving as an instrument of planned economic development with stability. The central bank performs the function of developing long-term financial institutions, also known as development banks, to make available adequate investible funds for the development of agriculture, industry, foreign trade, and other sectors of the economy.

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