Difference Between Branch Banking and Chain Banking (With Table)

Various types of banks are operating in the global economy to meet the financial needs of multiple groups of people involved in agriculture, industry, professions, and other activities. Knowing the difference between these banks is very important. Branch Banking and Chain Banking are two very different types of Banking System.

Branch Banking vs Chain Banking

The difference between Branch banking and Chain Banking is that banking through branches is referred to as branch banking. In contrast, a chain banking system is a form of banking in which three or more separately chartered banks are owned and operated by a group of people.

In the majority of countries, branch banking is the most traditional banking structure. A significant bank with many branches in various parts of the world, and even many branches within a cosmopolitan city like Mumbai, Kolkata, Chennai, or New Delhi, operates under this scheme.

Chain banking is a banking system used in the United States. It is a banking structure in which the same person or group of individuals operates two or more banks. It is accomplished by owning shares in two or more banks.

Comparison Table Between Branch Banking and Chain Banking 

Parameters of comparison Branch Banking  Chain Banking 
Definition A single bank that operates from several branches in a city, different locations, or outside of the city is referred to as branch banking. It provides a wide variety of face-to-face services to its clients. Chain banking is a form of bank governance in which one or more individuals or entities take control of at least three separately chartered banks. 
Ownership Managed by a board of directors and owned by a group of shareholders. Three or more separately chartered banks are owned and operated by a group of individuals. 
Popularity The system is still popular and known. The system has seen a decline in popularity.  
Services  Cash withdrawals and deposits from a demand account, financial advice from a consultant, safe deposit box rentals, and other services are available via a bank teller. Consistent returns from many banks in the same community, without worrying about stiff competition from other banks in the region. 
Founded inNear 1100-1300.After the market crash in 1929.

What is Branch Banking?

Branch banking refers to a banking system where a single bank conducts business through a network of branches distributed throughout the country. The bank will have a headquarter in one city and its branches throughout the world. The branch manager oversees the branch’s operations in compliance with the head office’s rules and policies.

When regulations allow, a bank can decide to open a branch banking organization, mainly if it serves a rapidly growing region and is under pressure to follow its business and household customers as they migrate or lose them to more conveniently located competitors.

Section 23 of the Banking Regulations Act of 1949 authorizes the establishment of the branches. For branch authorization regulation purposes, a unit should include a specialized branch, a satellite office, an extension counter, an ATM, an administrative office, a service branch, and a credit card center.

Branch banking has the benefit of assisting with improved management, inclusion, and risk diversification. The branch banking system also aids in the efficient use of cash reserves. It can transfer cash reserves from one branch where they are less needed to another branch where they are more needed in an emergency. Loans are issued based on merit rather than personal or local factors in this scheme. Loans are advanced to consumers according to a set of guidelines.

What is Chain Banking?

A situation in which a small group of people regulates three or more independently chartered banks is known as chain banking. The methods used to set up this form of arrangement usually include the individuals securing enough stock between them to control interest in each of the bank companies involved. Without the need for a central holding company, the system can be handled by creating interlocking directorates or boards of directors that essentially build a network between the banks.

Despite having shared control and ownership, each of these banks could continue to function independently. It prevents loss of revenue and conflicting interests. Besides that, the banks in the chain are given separate roles.

Chain banking came into existence around 1929 in the USA. The basic idea behind it was to increase profit in the market. Investors ensured each bank in their particular area had invested enough money in the market in various segments so that the investment doesn’t overlap. In this type of banking, every bank works indecently and completes its operations independently without the interference of an outer company.

When Chain Banking was new and had come into the market, it offered great services and succeeded in the market, but as liberal banks came into the picture, chain banking lost its popularity and is now in decline.

Main Differences Between Branch Banking and Chain Banking

  1. Branch Banking is still prevalent while Chain Banking is slowly declining. 
  2. Branch Banking is a system in which a single bank conducts business, whereas, in Chain Banking, business is done by a small group of people. 
  3. Branch Banking System does not have shared control and ownership, whereas the Chain Banking system does have shared custody and ownership. 
  4. Branch Banking has improved management and efficient use of cash reserves, whereas the chain banking system is outdated.  
  5. The Branch banking system has a major holding company, whereas the chain banking system does not need a major holding company. It is controlled by boards of directors. 


The majority owners or the heads of interlocking directorates are the controlling parties in a chain banking scheme. With the rise of interstate banking, chain banking as a whole has deteriorated.

In the twentieth century, branch banking networks experienced rapid growth and widespread acceptance. The branch banking system, which has a few branches, has a lot of capital and can take advantage of large-scale operations. The hiring of highly skilled and qualified personnel enhances management performance. In banking activities, labor division is implemented, resulting in increased efficiency in the bank’s operations. The right people are assigned to the right jobs, and specialization develops.

Also, a branch banking system provides greater diversification of both deposits and assets because of the broader regional coverage. Deposits are taken from areas where there are plenty of deposits, and loans are issued to areas where funds are low, and interest rates are high. This system gives you a more comprehensive range of shares and portfolios to choose from, increasing your options.


  1. https://www.jstor.org/stable/2977238
  2. https://www.nber.org/papers/w11291