Branch Banking vs Group Banking: Difference and Comparison

There are different kinds of branches of banks. Each of them has its own workings and functions. Each of them stands out differently when it comes to operating in the market.

Branch Banking is in the form of banking where the storefront locations are operated away from the institution’s home office, and this is done for the customer’s convenience.

On the other hand, group banking, as the name says, is a system of banking where the branch or the branches of the bank are operated by another association, trust, or even a corporation.

Key Takeaways

  1. Branch banking operates as a single legal entity with multiple branches; group banking consists of multiple legally independent banks under a shared umbrella.
  2. Centralized decision-making and uniform policies characterize branch banking; group banking allows for decentralized decision-making and flexibility.
  3. Branch banking can benefit from economies of scale; group banking offers diversification and risk mitigation.

Branch Banking vs Group Banking

In branch banking, the storefront locations are operated away from the institution’s home office for the customer’s convenience. Group banking requires a holding company, organization, or trust to own all the banks involved, effectively creating an umbrella under which all the banks operate.

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Branch Banking is in the form of banking where the storefront locations are operated away from the institution’s home office, and this is done for the customer’s convenience.

In branch banking, since 1999, one of the most significant and efficient changes is that banks are given a full permit to sell their insurance and investment products and banking services under one roof.

Group banking, as the name says, is a system of banking where the branch or the branches of the bank are operated by another association, trust, or even a corporation.

This can be direct or indirect too. In the USA, this type of banking was one of the most common ones between the years 1925-1929. The holding company or the association operating the banks can be or cannot be related to the bank. It did not matter much.

Comparison Table

Parameters of ComparisonBranch BankingGroup Banking
MeaningBranch Banking in the form of banking where the storefront locations are operated away from the institution’s home office, and this is done for the customer’s convenience.Group banking, as the name says, is a system of banking where the branch or the branches of the bank are operated by another association, trust, or even a corporation.
Other PartiesOther parties in this banking can be the other branch of the same bank.Other parties in this banking can be the same bank or its branch, depending on the association.
AdvantageSome of the advantages of this banking system are- funds are easily transferred, there are many facilities along with transactions.Some of the advantages of this banking system are- funds are easily transferred from one bank to the other one, this system holds the economy of many large-scale operations.
DisadvantageThere is unhealthy competition among the different branches. Decisions are delayed.There is a lot of corruption in this system. This form of banking holds a monopoly on other banks.
TransactionsIn general, all the branches of the banks are allowed to transact the banking business.All the branches are operated by another party, so the transaction system depends on them.

What is Branch Banking?

Branch Banking is in the form of banking where the storefront locations are operated away from the institution’s home office, and this is done for the customer’s convenience.

In branch banking, since 1999, one of the most significant and efficient changes is that banks are given a full permit to sell their insurance and investment products and banking services under one roof.

This banking system is adopted by commercial banks like currency converters ones who work in foreign exchange. In general, all the branches of the banks are allowed to transact the banking business.

Some of the advantages of this banking system are- funds are easily transferred, there are many facilities along with transactions and a geographic facility that is, if one branch is not available to help you, the other can.

Branch Banking

What is Group Banking?

Group banking, as the name says, is a system of banking where the branch or the branches of the bank are operated by another association, trust, or even a corporation. This can be direct or indirect too.

In the USA, this type of banking was one of the most common ones between the years 1925-1929. The holding company or the association operating the banks can be or cannot be related to the bank. It did not matter much.

This banking system is still quite famous in the USA.

Some of the advantages of this banking system are- funds are easily transferred from one bank to the other one, this system holds the economy of many large-scale operations, they always maintain its own board of directors, and no other party is involved in that, and there is always availability of the expert services.

group banking

Main Differences Between Branch Banking and Group Banking

  1. Branch Banking is a form of banking where the storefront locations are operated away from the institution’s home office, and this is done for the customer’s convenience. Group banking, as the name says, is a system of banking where the branch or the branches of the bank are operated by another association, trust or even a corporation.
  2. Other parties in Branch banking can be the other branch of the same bank, while other parties in Group banking can be the same bank or its branch, depending on the association.
  3. Some of the advantages of Branch banking system are- funds are easily transferred, there are many facilities along with transactions, and some of the advantages of Group banking system are- funds are easily transferred from one bank to the other one, this system holds the economy of many large scale operations.
  4. The disadvantages of Branch Banking are- there is unhealthy competition among the different branches, decisions are delayed, and the disadvantages of Group banking are- there is a lot of corruption in this system, and this form of banking holds the monopoly on other banks.
  5. In general transactions, all the branches of the banks are allowed to transact the banking business in Branch banking, while in Group banking, all the branches are operated by another party, so the transaction system depends on them.
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References
  1. https://www.jstor.org/stable/1992110
  2. https://www.jstor.org/stable/2977238
  3. https://academic.oup.com/ej/article-abstract/117/517/F52/5087904

Last Updated : 17 July, 2023

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