Political Factors: A Stable political condition expedites the economy as well as the banking

sector.
1. Ideology oI the state: Socialism impedes the development oI banking business whereas
capitalism enhances it.
2. Attitude oI the Government: Government can set up laws and regulations Iavoring the
banking sector.
3. Development Work: Increased expenditure by Government leads to increased income oI
people. This in turn leads to improved bank business.
4. Support to businessman: Government supports business man by making Iavorable
policies that in turn enhances banking business.

Socio-cultural Factor:
1. Values: Social Values possessed by the people oI an economy creates healthy
environment Ior the bank.
2. Security: People cannot Ireely operate Iinancial activity in an insecure economy.
3. Social status oI businessman: II the society gives business man the value that they
deserve, they will be encouraged to increase their activities, which in turn will be
beneIicial Ior banks.
4. Education: Banking transaction requires a certain level oI education. Illiterate customers
are not eligible Ior transacting with banks.
5. Cultural Consequences: A culturally conscious society provides a good environment Ior
banks.
6. Banking Habits: People should grow the tendency oI transacting with banks.

Legal Factors:
1. Business Control Laws: II Government enIorces laws that are Iavorable Ior the
development oI organizations, it will also create a good environment Ior banking
business.
2. Tax Laws: II either bank proIit or individual income is heavily taxed, banks Iace problem
in doing business smoothly.
3. Import and Export Laws: II strict laws are imposed Ior import/export business, the overall
economic activity will go down. As a result bank will lose their business.
4. Fiscal Laws: Fiscal Laws initiated by Government may either be Iavorable Ior or create
unIavorable environment Ior banking business.
5. Technological Factor: Technological development increases eIIiciency Ior bank
businesses. Also technological advancement in other sectors oI the economy increases
production and also income oI people, that Iurther enhances bank business.

Managerial Problems oI the Bank as caused by External Environment:
1. Liquidity Problem: Banks should ensure sound liquidity position by keeping an eye on
the environmental Iactors that may aIIect liquidity and scrutinizing various liquidity
indicators caused by environment.
2. Loan Policy: Loan policies should be implemented only aIter analyzing environmental
Iactors that are used to determine demand Ior loan.
3. Investment Policy: II banks Iormulate their investment policy by considering
environmental Iactors, they will Iace minimum or no problem at all.
4. Earning Management: Bankers must assess the sources and uses oI income based on
ban`s environment, in order to manage earning.
5. Assurance oI Solvency: Solvency oI a bank is at stake in times oI adverse environmental
conditions.