Branch banking is the operation of storefront locations away from the institution’s home office for the convenience of customers. It refers to a bank that is connected to one or more other banks in an area or outside of it; to its customers, this bank provides all the usual financial services but is backed and eventually controlled by a larger financial institution. They provide all the usual financial services but are backed and ultimately controlled by a larger financial institution.
Bank branches are the face of the banks where customers can visit and talk to the officials for getting better insights into new policies, investment schemes, other banking services, etc. On top of it, the personal touch in every service leaves a great impact on the minds of customers. People have started to drift towards the latest modes of banking like e-banking, mobile banking, etc. but the acceptance percentage is low as compared to other countries. These innovations hold promising future and branches have to continually evolve to remain relevant in the coming times.
Advantages of Branch Banking:
- Economies of Large Scale operations: Under this banking system economies can maintain through a large scale of operations and wider geographical coverage increases public confidence in the banking system.
- The economy of Cash Reserves: Under this banking system a particular branch can operate without keeping large amounts of reserves. It is not easy for a .unit bank to draw on another unit bank.
- Proper use of capital: Since the resources are transferred from one branch to another. So the capital can be properly used by investing in the profitable branches.
- The economy of Costs: It has the advantage of effecting remittances of funds from one place to another with greater ease and at a lesser cost than unit banking, for inter-office indebtedness can be far more easily adjusted.
- Easy and cheaper transfer of funds: Since the branches of the bank under this banking are spread all over the country, it is easier and cheaper, for it to transfer funds from one place to another.
Disadvantages or Demerits of Branch Banking:
- The danger of Mismanagement: Under this banking system a number of difficulties as regards management, supervision, and control, a number of branches undue expansions lead the danger of mismanagement.
- Delays in Decision-making: The system of branch banking also suffers from red tape and delay on account of the inadequate authority of branch managers.
- Lack of Personal Contact: The general managers have hardly any personal contact with the local people or the staff of different branches.
- High operating and maintenance expenses: Because with the opening of too many branches, establishment and maintenance charges of the branches are bound to be high and, as a result, profits may shrink.
- Lack of initiative: No branch office can take independent decisions and also a branch manager has limited powers.
