(a) Pure Banking: Under pure Banking, the commercial banks give only short-term loans to industry, trade

and commerce. They specialise in short-term finance only. This type of banking is popular in U.K. In U.K., Special institutions like investment houses, finance corporations were established for providing long-term finance. Hence, it is argued that commercial banks should provide only short-term loans. It is stressed on the lines of safety and liquidity. (b) Mixed Banking: Mixed banking is that system of banking under which the commercial banks perform the dual function of commercial banking and investment banking, i.e., it combines deposit and lending activity with investment banking. Commercial banks usually offer both short-term as well as medium term loans. The German banking system is the best example of mixed Banking where banks are permitted besides, lending activity, investment functioning also. In India, Banks are permitted to undertake limited investment activity. In USA commercial or credit banks are not permitted to undertake investment activity. Banks in Switzerland, Denmark, Japan also provide long-term loans. Advantages Mixed Banking has the following advantages: (i) Credit requirements are fully satisfied. (ii) Banking resources are utilized for industrial development. (iii) Industries can mobilize greater finance resources through these banks. (iv) Investment guidance to general public. (v) Expert guidance and advice to industries. (vi) Direct contact with industries. (vii) Promote rapid industrial development through investment banking. Disadvantages (i) Threat to stability of Banks- the stability of the bank may be affected if the prices of Securities in which banks have invested depreciate. (ii) Liquidity of banks may be affected, if the securities are not traded in the market. (iii) Possibility of engaging in speculative business (iv) Scope for over lending. After the Second World War, underdeveloped countries began to show much interest on mixed banking. In recent years, there has been a favourable trend towards mixed banking in India because of the following reasons: (a) Increase in the volume of deposits. (b) Increase in time deposits than demand deposits.

(c) RBI initiative to strengthen the banking system. (d) After nationalisation, the Government encouraged the public sector banks to grant long-term loans to small scale industries and entrepreneurs. It, is made on the grounds of rapid industrialisation in the country. (e) A realisation that overall growth depends upon development of capital market also.

Group Banking is the system in which two or more independently incorporated banks are brought under the control of a holding company. The holding company may or may not be a banking company. Under group banking, the individual banks may be unit banks, or banks operating branches or a combination of the two. Participating banks retain their own boards of directors which are responsible to the supervising and regulatory authority and depositors for the proper operation of the bank. That is, each bank in the group has got a separate entity. This system has developed in United States in 1900. It was popular and extensively developed in 1920's. Advantages of Group Banking The following are the advantages of the Group Banking System: (i) Centralized Administration: The participating banks enjoy the benefits of centralized administration. (ii) Enhancement of operational efficiency: Because of Group banking system, the operational efficiency of participant banks is enhanced through shared knowledge and experience. (iii) Broader market: Group Banking offers broader market to the small banks for their excess resources. Thus, their earning capacity and network improved. (iv) -Mobility and transfer of resources: In the case of crisis, the funds are transferred among participating banks. This helps them to face the financial crisis if any, more effectively (v) Large scale operation: Group banking paves the way for large scale operation. The member banks can get the economies of large scale operation.

(vi) Other Benefits: The holding company offers the following services to the participating banks: (i) Guidance of experts (ii) Auditing (iii) Investment counseling (iv) Combined Purchase of stationery and office equipments (v)Insurance cover on deposits (vi) Advertising and publicity (vii) Tax guidance (viii) Other advisory services. Disadvantages The disadvantages of the Group Banking System are as follows: (i) Lack of effective management and control: Under Group banking system the control and management is not effective because the control is indirect and more flexible. It cannot offer specialised management. (ii) Inefficiency of member banks protected: The inefficiency of one participating bank affects the other participating banks. (iii) Less facilities: This system cannot provide all the facilities offered by branch banking. (iv) Cannot mobilize funds: Group banking does not have the capacity to mobilise funds as in the case with branch banking. Hence, it cannot offer the same economy of operations as are offered by branch banking.