Unit banking has one office. Generally, limited banking services are offered to customers by a unit banking organizations. It is managed by its own governing body or the Board members. It refers to a bank that is a single, usually small bank that provides financial services to its local community. Although unit banking organization has one banking office, it can spread cash counters in the market place such as walk-in windows, automated teller machines, retail store point-of-sale terminals that are linked to the bank’s computer system. Funds are allocated in one branch and no support of other branches.
Unit banking is the oldest kind of banking organization most common in world banking today. One reason for the comparatively large number of unit banks is the rapid formation of new banks. It has an independent existence, as it is not under the control of any other individual, bank, or body corporate. It can be established easily even in an age of electronic banking and mega-mergers among industry leaders. It is a type of banking system adopted in many countries wherein there is a single independent small bank that caters to a particular locality. Many customers still seem to prefer small banks, which get to know their customers well and often provide personalized services.
Advantages of unit banking –
- Easier and effective Management – In this Bank System, the management and supervision of Unit Bank are much easier and effective.
- Utility for the local development – In this Banking, the funds of the locality are utilized for the local development and are not transferred to other areas.
- Tackle the local problems – Unit banking can tackle the local problems as they are in the position to take initiative to tackle as they have full knowledge of the local problems.
- Fewer chances of fraud – There are fewer chances of fraud and regularities in the financial management of the unit banks.
- No inefficient Banks- There will be no inefficient Banks as weak and inefficient banks are automatically eliminated.
Unit banking is that system of banking in which there is a single small banking company, that provides financial services to the local community. Most new banks start out as unit organizations because their capital, management, and staff are severely limited until the bank can grow and attract additional resources and professional staff. Later, they try to convert them into branch banking organizations. However, economic and legal barriers to banks expanding geographically into new territory still exist in some places. Yet, most banks desire to create multiple service facilities-branch offices, electronic networks, and other service outlets. In the competitive banking market, it is essential to open new markets and diversify geographically in order to lower the risk and cost of banking services. If the surrounding economy weakens and people move away to other market areas, it becomes very risky in relying on a single office location, from which to receive customers and income. In unit banking, the profits earned by the bank is used either for the development of the bank or for fulfilling the needs of the local community.