Difference Between Branch Banking and Unit Banking

Banking systems encourage either small, independent banks or banks that are theoretically independent but are in fact owned by a bank holding company.

The unit banking of a particular locality utilizes its resources for the development of its own locality only and does not transfer them to other localities like branch banking.

Branch banking refers to a single bank which operates through various branches in a city or in different locations or out of the cities.

There is some particular difference between branch and unit banking system;

DifferencesBranch BankingUnit Banking
Operational freedomLess Operational freedom.More Operational freedom.
Loans and advancesLoans and advances arc based on merit, irrespective of the status.Loans and advances can be influenced by authority and power.
Financial resourcesLarger financial resources in each branch.Larger financial resources in one branch
Decision-makingDelay in Decision-making as they have to depend on the head office.Time is saved as Decision-making is in the same branch.
FundsFunds are transferred from one branch to another.Funds are allocated in one branch and no support of other branches.
Cost of supervisionHighLess
MismanagementExists as improper use of power and authority existProper checks are taken up. No misuse of Mismanagement
DifferencesBranch BankingUnit Banking
SpecializationDivision of labor is possible and hence specialization possibleSpecialization not possible due to lack of trained staff and knowledge
CompetitionHigh competition with the branchesLess competition within .the bank
Locality/Resources/Funds/ProfitsShared by the bank with its branchesUsed for the development of the bank
Deposits and assetsDeposits and assets are diversified, scattered and hence risk is spread at various places.Deposits and assets are not diversified and arc at one place, hence risk is not spread.