DEFINITION of 'Underbanked'

A situation where an underwriter of a new securities issue has been unsuccessful in getting other firms to become members of the underwriting group or syndicate. As a result, the security will not be sold to as many clients as had been desired.

Underbanked can also refer to an individual or business that heavily relies on checks and cash as a mean of funding rather than bank related methods such as credit cards or loans.

BREAKING DOWN 'Underbanked'

An investment banker is underbanked when he or she is facing challenges in acquiring additional members for the underwriting group or syndicate for a new securities issue. If the originating investment banker is unable to find enough firms, he or she may not be able to underwrite the issue - and therefore would be unable to offer the security for sale.

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