Group Banking vs Chain Banking: Difference and Comparison

Banking is an industry that handles financial transactions. There are different types of banks functioning in various sectors of health, education, business, profession, agriculture, and so on to keep the economy running.

Group banking, Chain banking, Branch banking, Unit banking, and Mixed banking are the 5 types.

Key Takeaways

  1. Group banking is where different banks operate under the same parent company, providing financial services to market segments.
  2. On the other hand, chain banking is a type of banking where a single bank controls a group of banks located in different regions or countries.
  3. Group banking aims to cater to the diverse financial needs of a broader customer base, while chain banking focuses on expanding the network of banks to increase its geographical reach.

Group Banking vs Chain Banking

The difference between Group Banking and Chain Banking is that Group Banking is a group of several that exist and function under a single holding company. In chain banking, a chain of banks lives and functions under a single person or group.

Group Banking vs Chain Banking

Group Banking refers to a system in which a group of banks functions under a single holding company; the control a company can have over 2 financial institutions.

These groups of banks have to follow the rules and regulations of the company. They have to function within the barriers of the company.

Chain Banking refers to a system with a chain of banks controlled by an individual or a small group of people. The individual or group of people can hold at least three chartered banks.

They function independently and can avoid the barriers of working under a single holding company.

Comparison Table

Parameters of ComparisonGroup BankingChain Banking
PossessionA single company owns the institutions.The institutions are separately owned and are not part of a single entity.
AcquisitionThe group of banks can be acquired by any company involved in any sector.The banks can be acquired by any individual or family involved in any sector.
FunctioningThese banks function within the barriers of the single holding company. These banks function within the barriers of the individual or group of individuals.
Period of ProminenceThe group banking system gained prominence in America during 1925-1929.They came into prominence in America after 1929.
ExampleState Bank of India- SBI in India.KarurVysya Bank and Lakshmi Vilas Bank in India.

What is Group Banking?

A banking system in which a single holding company owns and controls more than two financial institutions/ banks is known as Group Banking.

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This system of Banking gained popularity in the United States of America between 1925 -1929. The company need not be in the banking business to own these banks.

The company can work or conduct business in any legal industry or sector, such as banking, agriculture, textile, medicine, entertainment, etc.

The banks function according to the rules and regulations laid down by the holding company. The management and administration are centralized. The SBI in India is an example of Group Banking in India.

The mainboard of directors and the separate entity of each bank is maintained. Because of centralization, there is better mobility of resources and credit facilities.

The accounting methods followed are the same for all the banks, which helps build better auditing reports. Not only funds but expertise are also made available from one bank to another in case of requirement.

If a particular bank or institution fails to perform well, it can have adverse effects on other banks, negatively affecting the holding company’s reputation.

group banking

What is Chain Banking?

A banking system in which more than three chartered financial institutions/ banks are owned and controlled by a single person or a group of persons or family is known as Chain Banking.

This banking system originated in America and gained prominence in 1929 after the stock market crash.

In this system, the ownership can be acquired by buying significant shares of the financial institutions. The individual or individuals can control the banks independently or unified.

In India, Karur Vysya Bank and Lakshmi Vilas Bank have headquarters in a commonplace and board of directors, making it an example of Chain Banking.

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The individual or group of individuals are not forced to be involved in banking. Even in chain banking, the owners can be working in any sector of business or profession.

The rules and regulations, as well as the administration and working of the banks, can be the same or different, according to the owners’ decisions.

The accounting methods to be followed also depend on the owners’ choice.

The other advantages and disadvantages are similar to that of Group Banking, such as mobility of funds, credit, expertise, and effect on the other banks.

chain banking

Main Differences Between Group Banking and Chain Banking

  1. The financial institutions in Group Banking are owned by a single holding company, and in Chain banking, by a single person or group of persons.
  2. The institutions in group banking can be held by a company working in any sector. In contrast, in chain banking, anyone working in any sector or profession.
  3. The holding company controls the administration of group banking. Although, in chain banking, the administration is governed by the owner/ owners.
  4. The group banking system was popular in the USA during 1925- 1929. At the same time, the chain banking system became popular after 1929.
  5. State Bank of India is an example of Group banking in India. Karur Vysya Bank and Lakshmi Vilas Bank is an example of Group banking.
Difference Between Group Banking and Chain Banking
References
  1. https://fraser.stlouisfed.org/files/docs/historical/house/1930hr_brchgr_v1p1.pdf
  2. https://www.degruyter.com/document/doi/10.7312/will93128-019/html

Last Updated : 11 June, 2023

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25 thoughts on “Group Banking vs Chain Banking: Difference and Comparison”

  1. The article presents the information in a clear and concise manner, making it accessible for readers with varying levels of expertise in banking and finance.

    Reply
  2. I expected more details about the advantages and disadvantages of group and chain banking, but the article mostly focuses on definitions and differences.

    Reply
  3. I appreciate the clear distinction between group and chain banking provided here. I feel like I’ve learned a lot about each system.

    Reply
  4. The contrasting definitions of group and chain banking provide a well-structured foundation for understanding the complexities of banking systems.

    Reply
    • Absolutely. A clear understanding of these fundamental elements is crucial in comprehending the broader operation of banking institutions.

      Reply
  5. It’s impressive how the article provides not just a definition of group and chain banking, but also a historical context, making it engaging and informative.

    Reply
  6. The historical context provided for group and chain banking allows readers to appreciate the evolution of these systems over time, shedding light on their current relevance.

    Reply
    • Good point. Understanding the historical trajectory of banking systems enriches our perspective on their contemporary role.

      Reply
  7. I found the elaboration on the functioning of group and chain banking systems to be particularly enlightening, offering a comprehensive view of their internal dynamics.

    Reply
    • I agree with you. The detailed insights into the functioning of these systems enhance our understanding of their operational mechanisms.

      Reply
    • Yes, the article effectively delves into the intricacies of how group and chain banking operate, providing valuable knowledge for readers.

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  8. The structured comparison between group and chain banking serves as a valuable educational tool for both students and professionals in the finance sector.

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    • Absolutely. The comprehensive analysis lays a strong foundation for enriching one’s knowledge of banking systems in the financial domain.

      Reply
    • Well said. This article can be a significant resource for individuals seeking an in-depth understanding of banking structures and their operational variances.

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  9. The comparison table is quite informative, but I find it lacking in addressing the contemporary significance of group and chain banking systems in the global financial landscape.

    Reply
  10. This article provides a detailed comparison between group and chain banking, which is very helpful for those interested in the banking sector.

    Reply
    • As someone studying finance, I found this article quite valuable for understanding the nuances between group and chain banking systems.

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