Definition
An industrial bank is a financial institution with a limited banking license that isn’t subject to the regulations of a typical bank. These banks are allowed to accept deposits and make consumer loans, but not offer checking accounts. Industrial banks are often owned by commercial firms that do not operate in the banking sector.
Phonetic
The phonetic spelling of ‘Industrial Bank’ is /ɪnˈdʌstriəl bæŋk/.
Key Takeaways
- Industrial Bank is one of the largest African-American owned and operated commercial banks in the United States. This underscores its ongoing dedication to serving minority communities and providing them with tailored banking solutions.
- Industry Bank offers a comprehensive range of financial products and services including personal banking, business banking, and online banking options. This makes it a versatile institution for different types of customers with a variety of banking needs.
- The bank was established in 1934, during the Great Depression. This historical background highlights the institution’s resilience, standing the test of time, and thriving against economic adversity.
Importance
Industrial banks play a pivotal role in the financial sector as they provide commercial loans, accept deposits and offer other finance-related services primarily to small and medium enterprises (SMEs). These institutions are vital for SMEs as they are typically underserved by larger commercial banks. Industrial banks, through their specialized products and services, support entrepreneurial innovation, spur economic growth, and promote employment. They can also be essential in financial inclusion efforts as they put banking and other financial services within the reach of individuals or businesses who are otherwise unable to access these services. Furthermore, industrial banks often have a more localized and personal connection with their customers, enabling them to develop tailored financial services that meet specific community needs.
Explanation
Industrial banks come into play when there is a need for financing industrial sectors, essentially serving as financial intermediaries to facilitate the growth and development of industries. The primary purpose is to extend credit to both small-scale and large-scale industries that require capital for their operations. Businesses turn to these specialized banks when they’re in the process of expanding, upgrading their equipment, improving their working capital, or want to carry out various other industrial activities, including but not limited to, setting up new plants, maintaining inventories and so on. Traditional commercial banks might find these risky or complex to underwrite, hence the role of an industrial bank.Industrial banks also perform numerous other functions that are paramount to the industrial growth of a nation. These include underwriting securities of industries, providing technical assistance and managerial services, offering consultancy services for project report preparations and feasibility studies, as well as conducting technologies and market surveys. While commercial banks handle a wide array of needs for individuals and businesses, an industrial bank focuses as a specialist in assisting industrial and business enterprises, acting as a catalyst in the industrial development of a country.
Examples
1. Industrial Bank of Korea: The Industrial Bank of Korea is a financial institution based in Seoul, South Korea. Established in 1961, the bank’s main purpose is to provide systematic credit and financial supports for Korea’s economic development, with a major focus on various types of businesses including SMEs (small and medium-sized enterprises).2. Industrial Bank Co., Ltd: Founded in 1988, this China-based bank essentially offers banking services to industries. The bank provides services to individuals, corporates, and institutional investors alike, offering deposit services, loans, fund settlement, etc. 3. Industrial Bank of Washington: This is a prominent example of an Industrial Bank based in the United States. Established in 1934, it serves the banking needs of businesses and commercial enterprises, providing various services including loan facilities, business checking, and online banking.
Frequently Asked Questions(FAQ)
What is an Industrial Bank?
An Industrial Bank is a type of financial institution that offers services such as accepting deposits and making loans to industrial and commercial entities. It’s distinct from commercial and retail banking, focusing more on businesses rather than individual customers.
Where are Industrial Banks commonly found?
Industrial Banks are relatively more common in countries like India, Japan, and Germany. However, they also exist in the U.S. primarily as chartered financial institutions in certain States.
What types of services do Industrial Banks provide?
Industrial Banks typically provide traditional banking services, including savings accounts, checking accounts, and loans. However, the primary focus is on meeting the needs of businesses and industries, which can include commercial real estate loans, equipment loans, or business lines of credit.
Are Industrial Banks subject to the same regulations as regular banks?
While Industrial Banks are regulated financial institutions, their oversight might fall under a different regulatory body depending on the country. In the U.S, they are regulated by the Federal Deposit Insurance Corporation (FDIC).
What is the difference between Industrial Banks and Commercial Banks?
While both types of banks offer services to businesses, Commercial Banks also routinely serve individual customers. Industrial Banks are more focused on providing services to businesses, particularly in certain industries or sectors.
Can individuals open accounts in Industrial Banks?
Typically, Industrial Banks focus on business customers. However, some may also offer accounts and services to individuals, although this is less common.
Do Industrial Banks provide investment services as well?
Industrial Banks primarily focus on offering deposit and loan services. While some might offer investment services, it’s not their primary function, and businesses may prefer to work with a dedicated investment bank for such needs.
Are the deposits in Industrial Banks insured?
In the U.S, deposits in Industrial Banks are insured by the Federal Deposit Insurance Corporation (FDIC), up to the legal limit per depositor. However, this can vary from country to country.
Related Finance Terms
- Commercial Loans
- Industrial Finance
- Asset Management
- Financial Intermediary
- Capital Funding
Sources for More Information
