Differentiate in between Branch Banking and Unit Banking System
A bank is one kind of financial institution which deals with money and other monetary instruments and conducts business. Bank receives deposits from one group of people and lends it to other groups of people. By this process, the bank earns a profit.
Both branch bank and unit banks are a financial institution or intermediary. For that reason, there are sonic similarities between them. But there are also some differences between them which arc described followings:
Unit Banking:
- Nature: a Unit bank is a small financial institution.
- Establishment: It is easy to establish a unit bank as it needs a small amount of money.
- Origin: It is first originated in the United State of America.
- Ownership: Generally unit hank is established in a form of Sole entrepreneurship, partnership business.
- The scope of working: Scope of working is limited within a small area.
- Making a decision: In unit banking, it is easy to make a decision quickly.
- Extra expenses: Administrative and other expenses are low.
- Liquidity: It has to reserve a huge amount of liquidity.
- A capability of capital generation & lending: Capability of capital generation and lending is low.
- Credit control: Impact of unit banking in controlling credit is not up to the mark.
- Transfer of money: the Unit bank can directly transfer its money from one place to another.
- Relationship with a central bank: To maintain a strong relationship with a central bank is not always possible for unit banking.
- Impact on the economy: As it is a small financial institution the impact of unit banking in the whole economy is low.
Branch Banking:
- Nature: Branch bank is a large final institution.
- Establishment: It is quite difficult and time-consuming to establish a branch bank as it needs a large amount of money.
- Origin: It is first originated in the United Kingdom.
- Ownership: Generally branch bank is established in a form of Joint Stock Company.
- The scope of working: Scope of working is large within the entire country and also overseas.
- Making a decision: In branch banking, it is quite difficult to make a decision quickly. To make a decision is time-consuming.
- Extra expenses: As it is a large financial institution administrative and other expenses are high.
- Liquidity: It has to reserve a small amount of liquidity.
- A capability of capital generation & lending: Capability of capital generation & lending is high.
- Credit control: Branch banking is felt a remarkable impact in controlling credit.
- Transfer of money: Branch bank can transfer its money from one place to another through its branches.
- Relationship with a central bank: Branch banking can maintain a direct relationship with central batik.
- Impact on the economy: As it is a large financial institution the impact of branch banking in the whole economy is high.
