Chain Banking
Chain banking – a common phenomenon under Unit banking system-is in fact an offshoot of Unit banking and relates to the ownership pattern of the banks. Under this system, two or more Unit banks are controlled by an individual or group of individuals or members of his/their family. For this purpose, the common owners hold majority of the shares in each bank. By virtue of the shareholding, they become common directors of each bank. Banks, however, maintain their separate identity.Holding Company Banking
Holding company banking – also called Group banking –
actually refers to two or more Unit banks which are held as subsidiaries by a
holding company. Such type of banking is in fact similar to Chain banking
having, however, one difference between them. In case of Chain banking, one
individual or group of individuals or members of the family own two or more
banks while in case of Holding company banking, a company in place of
individuals owns two or more Unit banks. Holding company may or may not
however, undertake business of banking.
Chain and Holding Company Banking: For And Against
Chain banking and Holding company banking or Group banking –
offshoots of Unit banking developed in the United States of America – have many
advantages. They are found to be better placed to pool greater resources and
hence they enjoy economies of scale as well. They can also concentrate on
serving a locality more effectively.
However, these systems of banking have certain disadvantages
as well. They may suffer from lack of control and wring utilization of funds.
Moreover, they may help concentration of economic power. That is why, even the
United States of America presently discouraging by law this system of banking.
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