Difference Between Branch Banking and Unit Banking

The local bank you walk into every day for your financial service needs is either a branch bank or unit bank in nature. On many key points, the branch banking, and unit banking system differs from each other.

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;

Branch Banking vs. Unit Banking

Differences	Branch Banking	Unit Banking
Operational freedom	Less Operational freedom.	More Operational freedom.
Loans and advances	Loans and advances arc based on merit, irrespective of the status.	Loans and advances can be influenced by authority and power.
Financial resources	Larger financial resources in each branch.	Larger financial resources in one branch
Decision-making	Delay in Decision-making as they have to depend on the head office.	Time is saved as Decision-making is in the same branch.
Funds	Funds are transferred from one branch to another.	Funds are allocated in one branch and no support of other branches.
Cost of supervision	High	Less
Mismanagement	Exists as improper use of power and authority exist	Proper checks are taken up. No misuse of Mismanagement
Differences	Branch Banking	Unit Banking
Specialization	Division of labor is possible and hence specialization possible	Specialization not possible due to lack of trained staff and knowledge
Competition	High competition with the branches	Less competition within .the bank
Locality/Resources/Funds/Profits	Shared by the bank with its branches	Used for the development of the bank
Deposits and assets	Deposits 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.