Unit Banking, Branch Banking and Group Banking

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Unit Banking

also known as Localized Banking

  • Single Office Only i.e., Native only.
  • No Branches. (Size and operations are small)
  • Best suitable for USA (as economy is better there)

Advantage:

  • Less chance of mis-management;
  • Initiative in banking business: because the management is of local only and they are aware what people need.
  • local development;
  • No delay in decision making;
  • No monopolistic tendencies.

Disadvantages:

  • Very Interference of Local People and community in decision making;
  • Liability to face crisis (as there are not large institutions);
  • Lack of Specialization;
  • Undesirable Competition: any management can open this type of bank;
  • It is present in good town, semi-large town but not the rural or small town.

Last Word: For India the Branch Banking is good.

Branch Banking

  • Commercial Banks adopt this (like Currency Converter Bank i.e., Foreign Exchange)
  • Branches are allowed to transact the banking business in general.

Advantages:

  • More Facilities;
  • Easy Transfer of funds;
  • Large Scale Operation;
    • More labor and specialization;
    • Big banks with huge resources and number of branches can create confidence among public.
  • Geographic Spread Risks (If money is not in one branch then another branch can help in that case)
  • Large Financial Resources;
  • Diversification of business and Assets;
  • Efficiency in management. (Experienced Officers are there)
  • Proper use of capital. (If money is not needed in Branch A it can transfer to branch B or where it is more needed.)
  • Contacts with whole country.

Disadvantages:

  • Duplication of Banking Facilities;
  • Unhealthy Competition;
  • Delay in decision making;
  • Inefficient Branches; (If one branch is not good then also it continues to operate)
  • Lack of Initiative;
  • Lack of Personal Contact;
  • Inefficient Control over Branches.

Group Banking

Two or more banks are directly or indirectly controlled by an association, trust or corporation. (famous in USA)

Advantages:

  • Transfer of fund from one branch to another;
  • Economies of large scale operations;
  • Maintain its own Board of Directors;
  • Availability of Experts Services.

Disadvantages:

  • Corruption; (because of members are if one same organization)
  • Monopoly;
  • Lack of efficiency; because control administrative office is generally not in position to enforce code of discipline.

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