Unit Banking vs Branch Banking – Difference and Comparison

What is Unit Banking?

A unit bank is a banking enterprise that is relatively smaller in size and functions. It is primarily meant to meet the banking needs of the local population of an area. It is not only smaller in size but also in its functions since a unit bank neither has an enormous asset of financial resources nor does it have any connection with other banks in the area.

The operations of a unit bank are mainly managed by a governing body that, in most cases, is independent in its decisions. The policies of a unit bank are primarily flexible and are tailored to offer services to a smaller number of people.

The management of a unit bank has a clearer understanding of the banking preferences of the locals. It is more efficient in maintaining public relations and offering suitable banking solutions to people. Moreover, such banks do not require a sizeable managerial team. Unit banks do not compete in service provisioning.

Interest rate is a vital component in contemporary banking. With regards to it, unit banks have varying rates that are determined, keeping in view the financial capacity of their clients. Furthermore, a unit bank is not answerable to any higher bank. It can make significant changes in its strategies and practices.

What is Branch Banking?

Branch Banking is a banking system whose operations and services are extended to multiple locations through various branches. It involves multiple branches of the same bank at different geographical locations. Branch banks cannot function independently because they are regulated by a central policy devised by the head office

In Branch Banking, huge financial resources are available to be utilized for multifaceted services. However, it is impossible for a branch to deviate from the central policy in handling the available resources. Such banks coordinate with other banks in their working pattern, and this form of banking is more prevalent.

Branches of a bank have a rigorous auditing and reporting system because every branch has to comply with the instructions of the head office. In case of unnormal situations, no branch can act without taking the head office in confidence.

The head office is responsible for assessing the financial landscape of its working area. It follows a unique hierarchy of positions held by individuals at every branch. The managerial team of a branch bank is relatively larger because of its complex operations.

Difference Between Unit Banking and Branch Banking

  1. These banking systems differ mainly in their size, purpose, and operations.
  2. Unit Banking is confined to a specific area.
  3. Branch Banking spans various locations, i.e., cities, states, and even countries.
  4. Unit banks are focused on their targeted community and can facilitate them without hassle or delay.
  5. Branch banks offer more services at the cost of a rigid banking policy and procedures.
  6. A unit bank comparatively has a limited number of resources.
  7. Branch banks have a broader and deeper pool of deposits.

Comparison Table Between Unit Banking and Branch Banking

Parameters of ComparisonUnit BankingBranch Banking
ScopeIt is narrower in the scope of operations and servicesIt functions in a broader sphere of operations and services
WorkloadThe workload of a unit bank is relatively lowA branch bank has more workload
RevenueUnit banks have lesser resources to useBranch banks hold lots of resources
ServicesA unit bank does not offer extensive servicesBranch Banking offers multifaceted services
Profit MarginThe profit margins are lesser for unit banksBranch banks draw substantial profit margins


  1. https://www.jstor.org/stable/1056432
  2. https://www.nber.org/papers/w11291