Unit Banking – Its Merits As Well As Demerits

The Unit Banking organization is that organization of banking nether which an private banking enterprise carries on banking line of piece of work concern either through a unmarried business office or through a few offices operating inside a express area  (Note :unit = single, scream upward similar that) . In this system, independent, isolated units perform banking business. The size in addition to are of functioning of unit of measurement banking are much smaller when compared to branch banking. Unit bankin gsystem originated in addition to grown inwards the U.S.A. Different unit of measurement banks inwards the U.S.A are linked amongst each other fiscal centers inwards the solid set down through “Correspondent Banking”.

Merits / Advantages of Unit Banking :3

The unit of measurement banking enjoys the next advantages.

  1. No Problem of Mismanagement : Each banking enterprise is modest scale unit of measurement thus in that location is no work of management in addition to supervision. A unit of measurement banking enterprise secures all the advantages of modest scale operaions in addition to thus in that location are less chances of mismanagement or incompetent management.
  2. No delay inwards Taking Decisions : In unit of measurement banking organization every banking enterprise is an independent unit, thus in that location volition live no delay inwards taking decisions.
  3. Personal Contact amongst the Customers : Unit Banking organization beingness a modest scale independent unit of measurement tin hand the axe keep adept personal contacts amongst the customers for efficient management of the bank. It is said that inwards illustration of unit of measurement banking organization the managing director tin hand the axe keep adept personal contact amongst the customers in addition to businessmen. 
  4. Low Overhead Cost : In illustration of unit of measurement banking organization the over caput damage volition live depression than inwards illustration of branch banking system.
  5. No Concentration of Monopoly Power : With the assist of unit of measurement banking organization it is possible to create socialistic blueprint of monastic nation which is a policy of Indian Government.
  6. Promotes Regional Balance : Under unit of measurement banking system, in that location is no transfer of resources from rural in addition to backward areas to the large industrial in addition to commercial centers. This tends to cut back regional imbalance.
  7. Initiative inwards Bank Business : The banking enterprise officers, nether the unit of measurement banking system, are fully acquainted amongst the local problems. SO they tin hand the axe accept first inwards taking of import decisions on the diverse issues confronting the bank. This makes the banking organization to a greater extent than elastic.
  8. Discontinuance of Inefficient Branches :Under unit of measurement banking system, weak, inefficient in addition to non-profitable branches are automatically eliminated. No prtection is provided to such banks. 
  9. No Diseconomies of Large-Scale Operations : Unit banking is gratis from the diseconomies in addition to problems of large-scale operations which are by in addition to large experienced past times the branch banks.
  10. More Operational Freedom : The managers of the unit of measurement banking organization are given to a greater extent than discretionary powers in addition to so that they tin hand the axe report the problems of local customers in addition to render meliorate services to them on merit.

Disadvantages or Demerits of Unit Banking System :

Generally speaking the advantages of Branch banking are the disadvantages of Unit Banking Following are the of import disadvantages of Unit Banking System.
  1. Lack of Economies of Large Scale : Unit banking organization beingness operated on modest scale, is deprived of economies of large scale operations.
  2. More Case Reserve : When compared to branch banking system, the banks operating nether unit of measurement banking organization must receive got to a greater extent than illustration reserve. In unit of measurement banking organization it is non slow to a unit of measurement banking enterprise to depict on roughly other unit of measurement bank.
  3. High Cost of Operations : In illustration of Branch banking organization the remittance of funds from i house to roughly other is of non bad ease in addition to at a lower damage than unit of measurement bank. It is non slow to suit the interoffice indebtedness inwards illustration of Unit Banking system.
  4. High Risk bearing : In illustration of unit of measurement banking system, the line of piece of work concern is highly localized in addition to whatever adverse weather inwards line of piece of work concern inwards the surface area severely lawsuit the bank. The banks nether unit of measurement banking organization cannot withstand greater shocks or serious crises.
  5. Lack of Mobility of Funds : In illustration of unit of measurement banking organization the concentration of funds is at i region. There is no possibility of displace of funds betwixt the regions in addition to localities resulting inwards unlike involvement rates at unlike places.
  6. Does non Provide Complete Banking Service : The banking enterprise operating nether unit of measurement banking organization does non render consummate banking service to its customers every bit done inwards illustration of Branch banking system.
  7. Problem of Supervision past times Central Bank : It becomes real hard to supervise each in addition to every banking enterprise operating nether unit of measurement banking system. 
  8. Absence of Division of Labor in addition to Specialization :  Unit banks because of their modest size in addition to express fiscal resources are non able to innovate in addition to larn advantages of sectionalization of labour in addition to spel\socialization. Such banks cannot afford to employ highly trained in addition to specialized staff. 
  9. Inability to facial expression cirsis : Limited resources of the unit of measurement banks too limit their mightiness to facial expression fiscal crisis. These banks are non inwards a seat to stand upward a precipitous rush of withdrawals. Inability to facial expression economical crisis was the argue why hundreds of unit of measurement banks failed inwards the U.S.A during the non bad depression of 1929.
  10.  No Banking Development inwards Backward Areas : Unit Banks, because of their express resources, cannot afford to opened upward uneconomic branches inwards smaller towns in addition to rural areas. As such, these areas stay unbanked.
  11. Costly Remittance of Funds : A unit of measurement banking enterprise has no branches at other places. As a result, it has to depend upon correspondent banks for transfer of funds from i house to another. This makes the displace of funds to a greater extent than expensive in addition to inconvenient for the businessmen. 
  12. Disparity inwards Interest Rates : Since slow in addition to inexpensive displace of funds does non be nether the unit of measurement banking system, involvement rates tend to vary considerably inwards unlike places.
  13. Local Pressures : Since unit of measurement banks are highly localized inwards their business, local pressures in addition to interferences by in addition to large disrupt their normal functioning.
  14. Undesirable Competition : Unit banks are independently run past times unlike managements. This results inwards undesirable contest amidst unlike unit of measurement banks.
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