Branch Banking

What is Branch Banking?

"Branch Banking" describes a system in which a bank offers services through a vast network of branch offices. The idea is to make the bank's operations more diverse in order to serve all its clients and different geographic areas/locations. When a bank has ten locations in a city, the account holders can choose the one that is close by to make deposits, withdrawals, and use other services. The branch office will provide the same services as the main location. The main branch oversees the branch office's operations. Every branch has a manager in charge of overseeing all of that branch's operations.

Branch banking enables a financial institution to extend its activities to other locations that serve as extensions of its core functions. This allows the institution to offer more services outside its main location. This can be a money-saving strategy for some organizations because it enables smaller branches to deliver crucial services while larger locations might offer more options.

It facilitates banking by removing geographical boundaries. For example, Citibank began its operations in New York in 1812 and currently has a network of 4,100 branches throughout 42 nations. Customers from different nations can use its services via branch offices even though they're not residing in New York.

Functions of Branch Banking

It is crucial to remember that a branch office effectively expands a bank's business to serve consumers and cater to diverse regions. Branch offices run their daily activities in accordance with the head office's policies to ensure smooth performance. Customers face a geographical barrier if there are no branch offices. If they don't live in the area where the bank is located, they won't be able to use its services.

However, recent advancements like online/net banking and mobile banking apps have significantly altered the banking sector.

The primary services provided by branch offices include the following:

Opening an Account

The employees at a branch office assist the customer in selecting the sort of account that meets their specific needs. An account opening form must be filled out with the necessary information. To open a current/savings account, one must generally deposit some minimum funds into their account.

Deposit Acceptance

Accepting public deposits, managing such deposits, and paying interest on them are all key duties of branches. The various types of deposits include:

• Term Deposits

Term deposits are funds that are held for a specific length of time. The money in the account cannot be withdrawn until the maturity date. Term deposit interest rates are marginally higher than savings account interest rates.

• Recurring Deposits

A recurring deposit enables individuals to invest a set amount of money each month. They are allowed to choose the tenure of the deposit and the monthly deposit amount in accordance with their convenience. This account type is suitable particularly for salaried people.

Lending

Giving loans to consumers based on their needs is a key branch banking task. It offers consumers loans up to a specified amount with applicable interest, and the borrower must pay back the loan amount plus interest in regular monthly payments. Additionally, banks provide both short and long-term loans to businesses.

Payment Transfer

The transfer of money from one individual to another via the banking system is known as a fund transfer. In addition to electronic transfers, a check (cheque) can also be used to transfer funds from one account to another.

Keeping Valuables Secure

A bank also plays a key role in protecting the public's wealth. Banks also offer a place to store valuables in a Safe Deposit. Customers can use them to keep valuables, gold, papers, and other items.

Demat Services

One of the functions of branch offices is opening and handling Demat accounts ("Dematerialization" accounts). A Demat account enables customers to purchase stocks and manage their investments online. The account's primary function is to store stocks and other securities electronically.

Unit Banking vs. Branch Banking

• In general, unit banking refers to a bank without any branches. It often has a limited presence and concentrates its operations in a single geographic region. Any main branch does not oversee its operation. In contrast, branch banking is under the main branch's supervision. Typically, a vast geographical area is covered by a network of branches scattered across several locations through branch banking.
• Since there is no provision for obtaining additional funding from other sources, funds for unit banking must be handled by the bank itself. The bank does not have external support in the event of a financial crisis. However, the main branch can manage any funding shortfall in its branches.
• In branches, the head office makes decisions, whereas in unit banking, the bank's management has that authority.
• In unit banking, loans are given depending on the power and authority of the local people. Loans are given out by branch banks based on consumer credit scores.
• In unit banking, the bank itself determines the interest rate, whereas the central bank sets the interest rate for the banking branches.