Types of Banking

What is Branch Banking?

Branch banking involves business of banking via branches. The branches are set up under Section 23 of Banking Regulations Act, 1949. A branch should cater to all banking services and include a specialized branch,  a satellite office, an extension counter, an ATM, administrative office, service branch and a credit card centre for the purpose of branch authorization policy. The advantage of branch banking is that it helps in better management, more inclusion and risk diversification.  The disadvantage of branch banking is that it might encourage outside local influences.

What is Unit Banking?

Unit banking is a system of banking which originated in US. It is a limited way of banking where banks operate only from a single branch (or a few branches in the same area) taking care of local community. In comparison to branch banking, the size of unit banks is very small. Due to small size and due to unit structure; the decision making in unit banks is very fast. The management in unit banks enjoy more autonomy and more discretionary powers. However, due to single units, the risk is not distributed or diversified.

What is Mixed Banking?

Mixed Banking is the system in which banks undertake activities of commercial and investment banking together.  These banks give short-term and long-term loans to industrial concerns.  The banks appoint experts which give valuable advice on various financial issues and also help gauge the financial health of companies. Industries don’t have to run to different places for differential financial needs. They thus promote rapid industrialization. They may however pose a grave threat to liquidity of a bank and lead to bad debts.

What is Chain Banking?

Chain banking system refers to the type of banking when a group of persons come together to own and control three or more independently chartered banks.  Each of these banks could maintain their independent existence despite common control and ownership. The banks in the chains were assigned specific functions so there was no loss of profits and overlapping of interests.

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