Branch Banking
Branch Banking defined under sec 23 of the Banking Regulation act 1949. In simple words Branch banking is a place where customers deposits are received, cheques withdrawen and other banking services are carried out.
According to Goldfield and chandler,” A branch bank may be a baking corporation that directly owns two or more banking agencies.”
Thus branch banking may be a system during which a bank renders its banking activities at two or more places. Head office has general control over the working of varied branches.
Advantages of Branch Banking:
Branch banking industry has the subsequent advantages:
Economies of huge Scale operations:
Branch banking enjoys the benefits and economies of huge-scale operations. Under branch banking industry economies can maintain through the large scale of operations and wider geographical coverage increase public confidence within the banking industry.
The economy of money Reserves:
Under the branch banking industry, a specific branch can operate without keeping large amounts of reserves. In a time of need, resources are often transferred from one branch to a different one. it's tough for a .unit bank to draw on another unit bank.
Proper use of capital:
There is a correct use of capital under the branch banking industry. Since the resources are transferred from one branch to a different. therefore the capital is often properly employed by investing within the profitable branches.
The economy of Costs:
Branch banking has the advantage of affecting remittances of funds from one place to a different with greater ease and at a lesser cost than unit banking, for inter-office indebtedness are often much more easily adjusted.
Risks-spreading Economy:
The spreading of risks geographically is another major advantage of the branch banking industry. In branch banking, losses incurred by one branch is often offset by profits earned by the profit-making branches which aren't possible just in the case of unit banking.
Easy and cheaper transfer of funds:
Since the branches of the bank under branch banking are spread everywhere in the country, it's easier and cheaper, for it to transfer funds from one place to a different one.
Greater Safety and Liquidity:
Branch banking also offers a wider scope for the choice of diverse securities and varied investments, so that a better degree of safety and liquidity are often maintained.
Balanced economical growth:
Under branch banking, the banking facilities are often made available to all or any cities, towns, and even backward areas within the country. Thus, branch banking is extremely helpful in achieving a balanced growth of the country's economy.
Convenient for the Central Bank's Supervision:
Under a system of branch banking, it's more convenient for the financial institution or the govt to manage and supervise the activities of banks, as control becomes simpler and easier since only the top office is to be addressed for the aim.
Provision for Training the Personnel:
Finally, branch banking provides the simplest training ground for personnel. an individual could also be trained during a small branch Where the pressure of labour is a smaller amount and he could also be transferred later to a lively branch.
Disadvantages or Demerits of Branch Banking: Branch banking generally suffers from the subsequent limitations:
The danger of Mismanagement: Under the branch banking industry variety of difficulties as regards management, supervision and control, a variety of branches undue expansions lead to the danger of mismanagement.
Delays in Decision-making:
The system of branch banking also suffers from bureaucratic procedure and delay on account of the inadequate authority of branch managers. Usually, application for giant credits has got to be mentioned the top office by the branch manager. This causes delay and provides little initiative to branch managers.
Lack of private Contact:
An outsized bank tends to become more and more impersonal in its dealings. the overall managers have hardly any personal contact with the local people or the staff of various branches.
High operating and maintenance expenses:
Branch banking is extremely expensive, because with the opening of too many branches, establishment and maintenance charges of the branches are sure to be high and, as a result, profits may shrink.
The concentration of Monopoly Power within the hands of a few bankers:
Branch banking sometimes creates monopoly power within the hands of few large bankers. Such a monopoly power within the hands of a couple of big bankers may be a source of danger to the community whose goal may be a socialistic pattern of society.
Lack of initiative: Branch banking lacks initiative and No branch office can take its own decisions and also branch manager has limited powers.
Regional imbalances:
Branch banking encourages regional imbalances. The financial resources of economically backward areas tend to urge transferred to industrial and business centres. thanks to which backward areas still be neglected and remain over backwards.
Features of Branch Banking
The features of a branch banking given as follows:
Central Office:
In branch banking industry there's a headquarters which controls the branches.
Branch office:
There could also be branches in countrywide or in abroad. the amount of branches is counting on the power and principles of the bank.
Ownership:
Generally such sorts of banks are owned by govt. or non govt. companies.
Capital:
Generally its capital is just too high. Now the scheduled bank has got to maintain 100 crore taka as paid up capital.
Determining policy:
All policies are determined by the headquarters .
Direction:
Branch banks continue its activities consistent with the direction of headquarters .
Deposits:
Its deposited amount is high because it collects deposit from various a part of the country.
Space of operation:
It continues its operation through the entire country.
Providing loan:
Because it has many branches so it can provide an enormous amount of loan. Observing from different aspects it can say that branch bank is wider than unit bank
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