Based on organizational characteristics banking systems may be categorized as follows: (a) Branch banking and (b) Unit banking. Associated with the Unit banking are: Chain banking and Holding company banking. On the other hand, based on techniques, banking system may be as follows: (a) Deposit banking, (b) Investment banking, (c) Merchant banking and (d) Mixed banking. By mixing together, these systems are also called hybrid system.
Modern banking systems had evolved through historical process depending on socio-economic, political and geographical factors. Since historical experience varied from one country to another, system evolved also varied from one country to another. It is observed that Branch banking originated in the United Kingdom whereas the United States of America is the home of Unit banking. On the other hand, the mixture of the two or hybrid system is found to be in operation in many countries of Asia and Africa, more particularly in India and other countries of the Far East.
The Branch banking developed in the United Kingdom primarily because of improved communications system and development of joint stock companies. On the other hand, the Unit banking developed in the United States of America under peculiar circumstances not found elsewhere. the US federal constitution permits both the federal and state governments to regulate banks. By virtue of this authority, many state governments prohibited Branch banking in the U.S.A. The spirit of free enterprise, freedom, distrust of monopolistic business favored the idea of Unit banking. As a result, it is observed that the U.S.A. is still the home of the largest number of small banks working in the respective states.
The mixture of the two systems (hybrid) is followed by many countries like India, France and West Germany etc. India, till the other day, was the home for a large number of small banks in addition to money lenders, cooperative banks and indigenous banks. With the development of communication system, nationalization of banks, legal intervention and merger etc. the number of banks in the recent past reduced substantially. Despite that it is observed that India has still both the bigger banks with country wide branch network and small regional banks with limited presence. By and large the , however, follow Branch banking. In addition, techniques of banking there include various elements like Deposit banking, Merchant banking, Investment banking, Specialized banking and Mixed banking etc.
France, on the other hand, has three groups of banks, namely Deposit banks, Investment banks and Specialized banks. France emphasized always on small business and personalized services. In west Germany, banks initially did rely on their own resources rather than Deposit banking. But bigger private banks are found to be engaged in Deposit, Investment and wholesale banking.
Between the system operating in different countries, sometimes some similarities are found. But dissimilarities are also substantial in nature. However, these are gradually disappearing primarily because of unprecedented progress in the communications system and replication of one's experience by the other.
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