Posted in Finance, Accounting and Economics Terms, Total Reads: 544
Definition: Industrial Bank
It is a financial institution with limited services which sell certificates called investment shares and they also accept customer deposits and then invest the funds in instalment loans for consumers and small enterprises. The bank may or may not be owned by non – financial institutions. These banks are sometimes also called as Morris banks or industrial loan companies. While the broad idea of the industrial bank is found in numerous countries around the world, the term mostly is used exclusively in the United States.
The loans offered by these industrial banks are mostly secured by a third party who acts as a guarantor for the loan disbursed. Industrial banks differ from the commercial lenders because they also accept deposits. The difference between commercial banks and industrial banks is that they do not offer the option of checking accounts. Another aim of an industrial bank may be to disburse loans for specific purposes that are somewhat related to the proprietor of the institution. It is imperative to note than an industrial bank does not always provide the same range of facilities as other banks. Most of them focus on lending activities only, and do not offer other types of accounts. Because of this, any individual or company who does any business with a lending institution also maintains bank accounts at other financial institutions, including the common checking and savings accounts.
For example, a car manufacturer may institute an industrial bank as a means to finance the purchase of their products, either by taxi services, corporates or by individuals who fulfil the credit requirements fixed by the institution. This method can sometimes ease the process of obtaining financing, and may even offer the customer a slightly better credit rates and other repayment options than what could be obtained elsewhere.