Disadvantages of Branch Banking

Following are the main disadvantages and limitations of branch banking system:

1. Problem of Management:

Under the branch banking system a number of difficulties as regards management, supervision and control arise:

(a) since the management of the bank gets concentrated at the head office, the managers can afford to be lax and indulgent in their duties and are often involved in serious irregularities while using the funds.

(b) Since the branch manager has to seek permission from the head office on each and every matter, this results in unnecessary delay and red- tapism in the banking business.

2. Lack of Initiative:

Branch managers generally lack initiative on all-important matters; they cannot take independent decisions and have to wait for. The clearance signal from the head office.

3. Monopolistic Tendencies:

Branch banking encourages monopolistic tendencies in the banking system. A few big banks dominate and control the whole banking system of the country through their branches. This can lead to the concentration of resources into a few hands.

4. Regional Imbalances:

Under branch banking system, the financial resources collected in the smaller and backward regions are transferred to the bigger industrial centres. This encourages regional imbalances in the country.

5. Adverse Linkage Effect:

Under branch banking system, the losses and weaknesses of some branches also have their effect on other branches of the bank.

6. Inefficient Branches:

In this system, the weak and unprofitable branches continue to operate under the protection cover of the large and more profitable branches.

7. Other Defects:

Other defects of branch banking system arc as follows:

(a) Preferential treatment is given to the branches near the head office,

(b) Higher interest rates are charged in the developed area to compensate for the lower rates charged in the backward areas,

(c) There is concentration and unhealthy competition among the branches of different banks in big cities,

(d) Many difficulties are faced when a bank opens branches. In foreign countries.

Advantages Of Branch Banking

Wednesday, May 12, 2010

Followings are the main advantages of branch banking

1. Less CostlyLarger banks have the resources and system to deliver low cost, broadly based services.

2. DiversificationA branch banking organization can diversify its sources and uses of funds among various users. It can direct funds into a market requiring financing.Deposits are received from the areas where lots of savings and loans are extended in those areas where funds are scarce and interest rates are high.

3. Greater efficiencyUnder branch banking system, the bank with a number of branches processes huge financial resources and enjoys the benefits of large-scale operations. Highly trained and experienced staff is appointed which increases the efficiency of the management.

4. More SaferA large banking system is generally safer. Fewer bank failures have occurred among large banks.

5. Variety of services and low transaction costsA greater variety of services and products become available to a broader banking public. Since the bank branches are spread over the whole country, it is easier and cheaper to transfer funds from one place to another.

6. Security against the risk of failureThe branch banking is less risky and greater capacity to handle risks. The losses incurred by some branches may be offset by the profits earned by other branches.

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Advantages And Disadvantages Of Bank Holding Company

Friday, May 14, 2010

Advantages Of Bank Holding Company

Followings are the main advantages of bank holding company

1. There is greater liquidity and mobility of resources.In case of crisis, funds can be transferred other banks2. Each member banks retains its separate entity and maintains its board of directors. But, at the same time, grouped banks enjoy the benefits of centralized administration.3. There is economy of advertisement expenditure. There is also a common purchasing agency which leads to economy in purchases.4. Services of experts can be made available to the member banks to manage their business efficiently.5. Common standardized account system improves the working of member banks.6. Large scale banking operations often indulge in corrupt practices.

Disadvantages Of Bank Holding Company

Followings are the main disadvantages of bank holding company

1. The control of member banks under the group banking system is less direct and more flexible than under branch banking. So, effective supervision is not possible.2. Efficiency of the member bank is adversely affected by the management of the holding company which uses the banks as vehicles of manipulation and speculation.3. The failure of one bank has its adverse effects on other member banks.4. The common purchasing agencies often indulge in corrupt practice.Posted by Keshav Poudel at 3:38 AM 0 comments

Disadvantages Of Branch Banking

Wednesday, May 12, 2010

Followings are the main disadvantages of branch banking system.

1. Chances of failureLarger banks are not immune to failure. Although there fewer large bank failures, the impact of a large bank failure presents great loss in amount and type of banking services.

2. Monopolistic tendenciesBranch banking encourages monopolistic tendencies in banking system. A few big banks dominate and control the whole banking system of the country through their branches. This limits competition and leads the monopolistic tendencies.

3. Lack of flexibility and delay in decision-makingSince the branch manager has to seek permission from the head office on each and every matter, this results in unnecessary delay in the banking.So, the branch managers are unable to make quick decisions and they may lose profitable opportunities.

4. Difficulty in supervisionSince the branches are spread over the country, so there is difficulty in efficient supervision and control of the all branches.This reduces the performance of the bank. Posted by Keshav Poudel at 3:45 AM 0 comments

Advantages Of Branch Banking

Followings are the main advantages of branch banking

1. Less CostlyLarger banks have the resources and system to deliver low cost, broadly based services.

2. DiversificationA branch banking organization can diversify its sources and uses of funds among various users. It can direct funds into a market requiring financing.Deposits are received from the areas where lots of savings and loans are extended in those areas where funds are scarce and interest rates are high.

3. Greater efficiencyUnder branch banking system, the bank with a number of branches processes huge financial resources and enjoys the benefits of large-scale operations. Highly trained and experienced staff is appointed which increases the efficiency of the management.

4. More SaferA large banking system is generally safer. Fewer bank failures have occurred among large banks.

5. Variety of services and low transaction costsA greater variety of services and products become available to a broader banking public. Since the bank branches are spread over the whole country, it is easier and cheaper to transfer funds from one place to another.

6. Security against the risk of failureThe branch banking is less risky and greater capacity to handle risks. The losses incurred by some branches may be offset by the profits earned by other branches.

Posted by Keshav Poudel at 3:28 AM 0 comments

Branch Banking

Branch banking is a system where full range banking services are o

ffered from several locations, including a head office and other one or more full-service branch offices. To start with, branch

banking developed in England, later on, it also become popular in other countries like Canada, India,Australia etc. In England, most of the banking business is in the hands of five big banks.Now most of the banks are operating in branch banking system.Branch banking system is very widely spread in the comparison to unit banking system. Posted by Keshav Poudel at 3:21 AM 0 comments

Disadvantages Of Unit Banking

Followings are the main disadvantages of unit banking

1. Prone to risk and failureLimited resources of the unit bank restrict their ability to face financial crisis. Unit banks are not in a position to stand a sudden rush of withdrawals.

2. No risk diversificationUnder the unit banking, the bank operations are highly localized.So, there is less possibility of diversification of risk in various areas.

3. Costly remittance of funds

Unit banking has no branches at other place. Thus, it has to depend upon the correspondent banks for transfer of funds which is very expensive.

4. Unhealthy competitionUnit banks are independently run by different managements. This results in unhealthy competition among different unit banks.

5. Local pressureSince, unit banking are highly localized in their business, local pressure and interferences generally disrupt their normal functioning. Posted by Keshav Poudel at 3:09 AM 0 comments

Advantages Of Unit Banking

Following are the main advantages of unit banking system.

1. Easy ManagementThe management and supervision of unit bank is much easier and more effective than that under branch banking system.So, there are fewer chances of irregularities and fraud.

2. Less operational costsUnit banking are generally in small size. Thus, there are fewer costs in the operations. Unit banking usually enjoy lower operating costs than branch banks of comparable size.

3. Little capital and staffsUnit banking is small in size; so capital and staff requirement in the bank is also small.

4. EfficiencyUnit banking increases the efficiency of bank because it provides prompt services to customers due to competition from other unit banks.

5. Local development

Collected deposits from the local areas are utilized for the development of the same locality.So, unit banking helps in local development. Posted by Keshav Poudel at 2:58 AM 0 comments

Unit Banking

Banking organization whereby all services of banks are offered from one office. Such office may have offer facilities such as, drive-in windows, automated teller machines, retail store point-of-sale terminals that are linked to the banks' computer system and Internet website. The size and the area of operation of a unit bank are much smaller than the branch banking system. Unit bank system originated and grew in the United States Of America. Different unit banks in America are linked with each other and with other financial centers in the country through correspondent banks. The main reason for the development of unit banking system in America is the fear of emergence of monopoly in banking business. Posted by Keshav Poudel at 2:19 AM 0 comments Newer Posts Older Posts Home Subscribe to: Posts (Atom)

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