Type of Banking Systems- Banking systems performs several different functions, depending on the network of institutions. For example, payment and loan functions at commercial banks allow us to deposit funds and use our checking accounts and debit cards to pay our bills or make purchases. They can also help us finance our cars and homes. The banking systems operating in different countries may be classified into branch banking and unit systems.
Unit Banking Systems
Unit banking exists when banking services are provided by single offices. Some of these banks are often allowed to have some branches within a limited area. These unit banks are linked together by the correspondent bank systems. The correspondent banks system acts as a medium for remittances between one bank and another and provides facilities for consultation for lending risks and sharing loan business.
Unit banking consists of provision of banking services by a single institution. However, the unit bank may have branches within a strictly limited area.
Branch Banking System
In this system, there is one head office that conducts its operation at two more centers and is controlled by the same board of directors. In the case of public sector banks, the bank is owned by the Government of India and in the case of private sector banks, it is shareholders.
After nationalization, the branch expansion program had a positive impact on poverty and non-agriculture output as licenses were granted to open commercial banks in backward rural locations.
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