Branch Banking vs Chain Banking: Difference and Comparison

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 Systems.

Key Takeaways

  1. Branch banking refers to a banking system in which a bank operates through a network of branches in different geographical locations. In contrast, chain banking refers to a banking system in which a group of banks are interconnected through a centralized system.
  2. Branch banking offers personalized services and is better suited for local banking needs, while chain banking offers greater convenience and accessibility to customers through its network of interconnected banks.
  3. Branch banking is generally more suitable for smaller banks, while chain banking suits larger banks with multiple branches and operations.

Branch Banking vs Chain Banking

Branch banking refers to a system of banking in which a single bank operates multiple branches in different geographical locations within the same country. Chain banking refers to a system of banking in which a group of banks are linked together through common ownership, management, or control.

Branch Banking vs Chain Banking

In most countries, branch banking is the most traditional banking structure.


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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 where 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

Parameters of comparison Branch Banking  Chain Banking 
Definition A single bank that operates from several branches in a city, in 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 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 regional banks. 
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 branches distributed throughout the country.

The bank will have a headquarter in one city and branches worldwide. 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 pressured 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 centre.

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, where they are more needed in an emergency.

Loans are issued based on merit rather than personal or local factors. Loans are advanced to consumers according to a set of guidelines.

branch banking

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 arrangement include the individuals securing enough stock between them to control interest in each bank company.

Without 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.

These banks could continue to function independently despite having shared control and ownership. 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 area had invested enough money in the market in various segments so that the investment didn’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, but as liberal banks came into the picture, chain banking lost its popularity and is now in decline.

chain banking

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. Boards of directors control it. 
Difference Between Branch Banking and Chain Banking

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