Branch Banking System

In most of the countries, commercial banks guide hold adopted branch-banking system. Under this system, a commercial banking concern tin laissez passer on the axe opened upwards its ain branches at whatever identify inside the province or abroad, of course, amongst the prior permission of the key banking concern in addition to / or the concerned federal in addition to / or local government. All the branches volition live allowed to transact the banking trouble concern inwards general. The commercial banks nether this arrangement tin laissez passer on the axe every bit good opened upwards specialized branches to transact special transactions such every bit home-loans, unusual exchange, etc.

Merits of Branch Banking System

The branch banking arrangement has many advantages, which brand this arrangement superior to the unit of measurement baking system. The next are the major advantages of branch banking system.
  1. Increase inwards Banking Facilities : Under branch banking system, a commercial banking concern tin laissez passer on the axe opened upwards its branches inwards cities, towns in addition to rural areas inwards the country. On the contrary, it is rather hard to ready unit of measurement banks inwards smaller towns nether developed areas inwards the country. 
  2. Transfer of Funds : Under branch making arrangement it is easier in addition to cheaper for it to transfer funds from ane branch to only about other branch, since the branches of the banks scattered all over the province nether branch banking system. 
  3. Large Scale Operations : Branch banking tin laissez passer on the axe relish the advantages of large-scale operations. Large-scale operations resultant inwards divisions of project in addition to specialization in addition to productivity of banks greatly increases. Moreover, a large banking concern amongst huge resources in addition to a publish of branches tin laissez passer on the axe exercise confidence amid the public. This inwards plough enables a commercial banking concern to strengthen its operations. 
  4. Geographical Spread of Risks : Under branch banking system, losses suffered inwards ane branch tin laissez passer on the axe live start past times or adjusted past times profits of the net making branches of the same bank. Under this arrangement the large size banks tin laissez passer on the axe withstand for a longer fourth dimension amongst huge losses in addition to adverse circumstances. 
  5. Large Financial Resources : The of import merit of branch banking arrangement lies inwards the advantages derived from the large fiscal sources. The branch banking arrangement tin laissez passer on the axe easily catch the requirements of large customers. Further the failure of borrowers inwards whatever area, withal large they may be, require non Pb to failure of the bank. Infact, ane of the of import merits of branch banking is its fiscal forcefulness in addition to mightiness to catch whatever crisis. 
  6. Economy inwards Cash Reserve : A commercial bank, amongst a publish of branches inwards unlike parts of the country, tin laissez passer on the axe afford to care amongst a lower cash reserve ratio inwards each of its branches. If at that topographic point is a shortage of cash inwards ane branch it tin laissez passer on the axe live drawn from only about other branch of the same banking concern if it guide hold it excess cash reserves. 
  7. Diversification of Business in addition to Assets : Since the branch banking arrangement covers a broad geographical area; at that topographic point exists possibilities of diversification of trouble concern in addition to assets.
  8. Efficiency inwards Management : Under this arrangement the officers branch managers tin laissez passer on the axe live carefully trained in addition to offered amongst greater chance for advertisement for those who create improve results. The services of experienced officers at caput quarters volition every bit good live available to all branches. 
  9. Wider Scope for Selection of Securities : Branch banking offers a wider reach for the alternative of various securities in addition to varied investments so that a higher marking of security in addition to liquidity tin laissez passer on the axe live maintained. .
  10. Effective Central Bank Control : Under Branch banking system, all the branches of a banking concern volition live controlled past times their caput purpose in addition to / or regional office. These banks inwards turn, volition live controlled past times the key banking concern of the province really effectively. 
  11. Proper exercise of Capital : Under this arrangement the banking concern tin laissez passer on the axe brand a proper exercise of its fiscal resources. If a branch of the banking concern happens to guide hold enough of deposits but no opportunities for investments, it tin laissez passer on the axe transfer its surplus funds to only about other branches, which tin laissez passer on the axe brand a profitable exercise of such funds for merchandise in addition to industry.
  12. Common Interest Rates : Branch banking has an additional payoff of bringing most equality inwards Interest Rates. If the need for coin goes upwards inwards a for sure component of the province then, nether branch banking, the funds tin laissez passer on the axe transferred to it shape only about other branch where at that topographic point are excessive reserves, so the charge per unit of measurement of involvement tin laissez passer on the axe live prevented from rise inwards the sometime place. 
  13. Economy inwards Banking : Besides efficiency inwards management, the branch banking arrangement ensures neat economic scheme inwards its working uppercase is made available inwards enough in addition to at cheaper rates internal in addition to unusual central trouble concern tin laissez passer on the axe live held economically; in addition to fifty-fifty small-scale isolated towns in addition to village, where no independent banking concern tin laissez passer on the axe survive, tin laissez passer on the axe live provided amongst adequate in addition to comprehensive banking facilities.
  14. Contracts amongst Whole Country : Under branch banking system, hte banking concern maintains regular contacts amongst all parts of the country. Undoubtedly it helps to larn right in addition to reliable noesis most economical weather condition inwards various parts of the country. It helps the banking concern to brand proper in addition to profitable investments of its surplus funds.

Demerits of Branch Banking System 

The next are the major disadvantages of branch banking system. Actually, the disadvantages of Branch Banking are the advantages of Unit Banking System.
  1. Duplication of Banking Facilities : Under this arrangement unlike banks may opened upwards their branches inwards the same area, town or metropolis resulting inwards duplication of banking facilities. 
  2. Unhealthy Competition : Under this arrangement the branches of unlike banks may compete amongst each other inwards the same areas, towns in addition to cities that may Pb to unhealthy contest amid the banks. 
  3. Delay inwards Decision Making : Under branch banking system, the branch managers of commercial banks volition live entrusted amongst a express determination making powers, peculiarly inwards illustration sanctioning of huge sum of loans. They refer these types of matters to their respective caput officer’s or / in addition to regional offices for their determination or recommendation. This may accept to a greater extent than fourth dimension causing a lot of inconvenience to the loan seekers. 
  4. Inefficient Branches : In this system, the weak in addition to unprofitable branches maintain to operate on ane pretest or the other. 
  5. Ineffective Control over Branches : Since commercial banks opened upwards to a greater extent than branches inwards unlike parts of the country, it is hard to every commercial banking concern to control, care in addition to supervise all the activities of all of its branches effectively.
  6. Lack of Initiative : The branch managers ordinarily are reluctant to undertake chance inwards taking of import determination pertaining to their branches due to their ain apprehensions most their superior officers at caput office. 
  7. Lack of Personal Contact : A large banking concern tends to give-up the ghost to a greater extent than in addition to to a greater extent than impersonal inwards its dealings. The full general director has hardly whatever personal contact amongst the local people or the staff of unlike branches.
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