14 Difference Between Unit Banking And Branch Banking

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What Is Unit Banking?

A unit bank is a type of bank under which banking operations are carried by a single office and they limit their operations to a limited area. Unit banks do not open any branch in other places and is more responsive to local needs. The management and control of unit banks is much easier and effective due to the small size and operations of the banks. There are fewer chances of fraud and irregularities in the financial management of the unit banks.

Unlike branch banking where policies are framed taking a larger context in mind. Decisions are quicker and more suitable to the customers. These banks focus on development of the local area and better community service. Unit banking is free from the diseconomies and problems of large-scale operations which are generally experienced by the branch banks.

What You Need To Know About Unit Banking

  1. Banking system which provides services in a specific area by a single branch.
  2. It enjoys independence of operation than branch operation.
  3. Branch banks are more vulnerable to failure and heavy risks in case of failure of local economy.
  4. In Unit banking, financial resources are limited to the particular unit only.
  5.   In the unit banking system, the rate of interest is not fixed as the unit bank has its own policies and guidelines.
  6. Decision making is prompt and there is also time saving in decision making.
  7. Loans and advances can be influenced by authority and power.
  8. Deposits and assets are not diversified and are at one place hence risk is not spread.
  9. Profits are used for the development of the bank.
  10. Due to being spread in a limited area, there are no benefits of division of labor and specialization.
  11. Remittances of money can be done with expenses of little time and money.
  12. It requires less operational and supervision costs.
  13. There is no geographical spread of risk.
  14. There is no proper distribution of capital and power.

What Is Branch Banking?

Branch banking is a type of banking system under which the banking operations are carried with the help of branch network and the branches are controlled by the head office of the bank through their zonal or regional offices. Each branch of the bank will be managed by a responsible person referred to as branch manager who is assisted by officers, clerks and sub-staff.

Under branch banking system, a particular branch can operate without keeping large amounts of reserves. In time of need, resources can be transferred from one branch to another. It is not easy for a unit bank to draw on another unit bank. In branch banking, losses incurred by one branch can be offset by profits earned by the profit making branches.

What You Need To Know About Branch Banking

  1. Banking system which provides banking facilities in different part of the country through different branches.
  2. It is fully controlled by the head office; therefore, it enjoys less independence than unit banking.
  3. Branch banking is more stable and resilient to failure of the economy because of backing by other branches and head office.
  4. A branch bank has a large pool of financial resources at its disposal.
  5. In branch banking, the interest rate is decided by the head office as per the directions of the central bank.
  6. There is delayed decision making as they have to depend on the head office.
  7. Loans and advances are based on merit, irrespective of the status.
  8. Deposits and assets are diversified, scattered and hence risk is spread at various places.
  9. Profits are shared by the bank with its branches.
  10. Due to being spread in larger areas, benefits of division of labor and specialization can be realized.
  11. Remittances of money can be done with expenses of too much time and money.
  12. It requires more operational and supervision costs than unit banking.
  13. There is geographical spread of risk.
  14. There is proper distribution of capital and power.

Also Read: Difference Between Private Equity And Venture Capital

Difference Between Unit Banking And Branch Banking In Tabular Form

BASIS OF COMPARISON UNIT BANKING BRANCH BANKING
Description Banking system which provides services in a specific area by a single branch.   Banking system which provides banking facilities in different part of the country through different branches.  
Independence It enjoys independence of operation than branch operation.   It is fully controlled by the head office; therefore, it enjoys less independence than unit banking.  
Vulnerability Branch banks are more vulnerable to failure and heavy risks in case of failure of local economy.   Branch banking is more stable and resilient to failure of the economy because of backing by other branches and head office.  
Financial Resources In Unit banking, financial resources are limited to the particular unit only.   A branch bank has a large pool of financial resources at its disposal.  
Rate Of Interest In the unit banking system, the rate of interest is not fixed as the unit bank has its own policies and guidelines.   In the unit banking system, the rate of interest is not fixed as the unit bank has its own
Decision Making Decision making is prompt and there is also time saving in decision making.   There is delayed decision making as they have to depend on the head office.  
Loans & Advances Loans and advances can be influenced by authority and power.   Loans and advances are based on merit, irrespective of the status.  
Deposits & Assets Deposits and assets are not diversified and are at one place hence risk is not spread.   Deposits and assets are diversified, scattered and hence risk is spread at various places.  
Division Of Labor Due to being spread in a limited area, there are no benefits of division of labor and specialization.   Due to being spread in larger areas, benefits of division of labor and specialization can be realized.  
Remittances Remittances of money can be done with expenses of little time and money.   Remittances of money can be done with expenses of too much time and money.  
Operation & Supervision Costs It requires less operational and supervision costs.   It requires more operational and supervision costs than unit banking.  
Geographical Spread Of Risk There is no geographical spread of risk.   There is geographical spread of risk.  
Distribution Of Capital & Power There is no proper distribution of capital and power.   There is proper distribution of capital and power.