Disadvantages Of Unit Bank

The customers of the bank can have direct contact with the bank because the area of operation of the bank is limited. The grievances that the customers have can be redressed then and there.

 No Evil Effects Due to Strikes or Closure:

In case of the unit bank, which does not have any branches elsewhere, there is no fear of a strike or closure of unit in other parts of the country which is going to have an impact elsewhere. It does not have much impact on the trade and industry because of its small size. In addition to that it also does not affect the entire banking system also.

 No Monopolistic Practices:

It is highly difficult for the Unit Bank to adopt monopolistic policies and practices because of the fact that the size of the bank and

The specialised knowledge of the local problems enables them to serve the requirements of the local people in a better way than the Branch banking the funds of the locality are utilised only for the sake of local development and the funds are not transferred to other areas or other branches.

 Promotes Regional Balance:

Under the Unit Banking system, there lies no scope for the transfer of the resources from the backward and the rural areas to the big industrial and commercial centres as is the case in Branch banking and as a result this type of banking helps the reduction of regional imbalances.

Disadvantages of Unit Banking

Though the Unit Banking has a number of advantages, it doesn’t mean that it is free of the disadvantages. The following are some of the disadvantages that plague the Unit Banking system.

 No Economies of Large Scale:

The Unit Bank cannot reap the advantages of large size like specialisation and division of labour because of its inherent nature of being a small bank.

 Lack of Uniformity in Interest

This simply connotes the existence of small number of big banks which have branches across the country. Branch banking system is quite prevalent in countries like Canada, United Kingdom, India and Australia. These kind of branches indulge in financial activities on a large scale across the country because of the fact that huge financial resources are available with these banks. The unique feature of the Branch banking system is that the operations of these banks are done on a large scale and are characterised by the presence of a number of branches across the country. Most of the banks in India come under this category. All the public sector banks in the country, namely, the State Bank of India and the other Nation’s Banks fall in this category. It is mandatory on the part of the banks in India to acquire license from the Reserve Bank of India under the Banking Regulation Act in the intend to start a bank itself or the branches of the existing bank. Thus, we can understand that