3-6-3 Rule – An unofficial banking rule !!



3-6-3 is an “unofficial rule” under which the banking industry once operated and which alludes to it being noncompetitive and simplistic. The banking industry of the 1950s, 1960s, and 1970s is often described as operating according to a 3-6-3 rule .The rule basically explains how bankers would give 3% interest on depositors’ accounts, lend the depositors money at 6% interest and then be playing golf at 3pm. This alludes to how a bank’s only form of business is lending out money at a higher rate than what it is paying out to its depositors.

In the past when the government implemented tighter banking regulations, the growth of the banking industry became stagnant as the regulations controlled tightly the rates at which banks can lend & borrow money. The regulations also included limits on the formation of new banks and their location However, these regulations loosened in 1980s and the widespread adoption of information technology such as the internet, banks now operate in a much more competitive and complex manner. The world of banking is never the same again! The banks are now providing insurance, brokerage and other forms of financial services.

S0, we can conclude this as :
3-6-3: The ‘unofficial’ banking rule – take deposits at 3%, lend at 6%, go play golf by 3 O’ clock; NINJA : No Income No Job Assets.