BANKING AND INSURANCE

1. Assignment on
Test of Hypothesis
Course Title: Statistics for Business Decisions
Course Code: STA-201
Submitted to:
Mrs Nahid Sultana
Lecturer
Department of Business Administration.
Shahjalal University of Science and Technology
Shahjalal University of Science & Technology, Sylhet.
Submittedby:
Md. Jayed Husain
2nd Year, 2nd Semester
Reg. no: 2012731011
Department of Business Administration
Shahjalal University of Science and Technology

2. Unit Banking:
Unit banking refers to a bank that isa single, usually small banks that provides that provides
financial services to its local community. It is a system of banking, in which the government
restricts or does not permit a bank to open branch offices. Unit banking carried on by individual
banks without branches or corporate relationships with others banks.
Mr. Sayers Says-“The unit banking system is the unit or single office bank serving its small local
community”.
Features of unit banking:
1. Centralized management: Management practice in which all or most decision makers ( who
have authority, control and responsibility for the entire organization) are located in one central
office(The headquarters).
2. Non-existence of branch office: Unit banking system has no branch office. Senior and
subordinate officers do their job in a specific office.
3. Limited area: The functions of this banking system is limited on a specific area. It has little
opportunity to broad its economic activities.
4. Independence of work: In the unit banking system, There is not any control of head office.
So, every employee of unit banking system enjoys full independence in their work.
5. Centralization of the employees: The employees of unit banking system works in unique
branch. So, there has no opportunity to transfer from one branch to another branch.
6. Limited functions: A unit bank cannot participate in versatile work because it has no
opportunity to work for broad area.
7. Centralization in the decision making: In unit banking system, Management takes decision
as like as autocratic government.
8. Small scale organization: Unit banking system is a small scale organization. It has little
opportunity to do banking with remote area’s banks.
Advantages of unit banking:
There are huge numbers of Unit bank in United States for the reason its advantages. So, Unit
banking system has following advantages.

3. 1. Expert Management: The functions of unit banking system are limited in one office. So,
Unit bank officials can manage their bank easily & smoothly.
2. Prompt Decision Making: Unit banking system can take decision quickly because all the
managers do their work in same office.
3. Less Costly: The preliminary expense of this bank is so less because unit bank does it work
for specific office.
4. Local Development: Unit banking is localized banking. The unit banking has the
specialized knowledge of the local problems and serves the requirement of the local people in a
better manner than branch banking.
5. Promotes Regional Balance: Under unit banking system, there is no transfer of resources
from rural and backward areas to the big industrial or commercial areas. This tends to reduce
regional balance.
6. Easy Management: There are less chances of fraud and irregularities in the financial
management of the unit banks.
7. No Monopolistic tendencies: Unit bank are generally of small size. Thus , there is no
tendencies of monopolistic under unit banking system.
8. No Inefficient branches: In the unit banking system ,weak and inefficient branches are
automatically eliminated.
9. Less risk: The amount of capital in this banking system is so small. For this reason, It has
less risk of business loss.
10. Employer & employee direct relationship: The owner and the employees of this bank work
in one specific office. So, It creates direct relationship with them.
Disadvantages of Unit banking:
The scope of business and economic activities are getting larger day by day.So, Unit banking
system cannot serve this broaden economic activities properly and smoothly. For this reason the
popularity of unit banking system is getting lower. The disadvantages of unit banking system are
described in below.
1. Difficulty in transfer of money: Unit banking system has no opportunity to transfer money
from one branch to another branch.
2. No distribution of risks: It has little possibility of distribution of risks because its operation
is totally localized.

4. 3. Unable to form large capital: The operation of unit bank is limited in one large area. So, It
has no opportunity to develop large amount of capital.
4. Lack of specialization: Unit banks, because of their small size are not able to introduce
division of labor and specialization.
5. Liquidity problem: For the reason of security unit bank saves huge amount of money. So,
the lending amount of money decreases.
6. Lack of goods relationship with central bank: There is little opportunity to carry on good
relationship with central bank because unit is totally localized.
7. Lack of training & research facility: The financial capability of unit bank is not so high. So,
it cannot provide the facility of training & research.
Branch Banking:
Branch banking is a retail location where a bank, credit union , or other financial institution
offers a wide array of face to face and automated services to its customers. Also, Branch banking
refers to a bank that is connected to one or more other banks in an area or outside of it , to its
customers this bank provides all the financial services but is backed and ultimately controlled by
a larger financial institution.
Professor Mclead says “ Branch banking system is that system of banking which controls and
maintain many branches either inside the country or in abroad.
Professor J. L. Hanson says “Branch banking means a banking system with a small number of
banks each with a large number of branches.
Features of Branch Banking:
In this world of business the impact of branch banking is remarkable. For some outstanding
features this banking system is much more acceptable. The features of branch banking are
described in below:
1. Existence of branch office: One bank has many numbers of branches by one name. the
management of bank, establish their branch in domestic & foreign area.
2. Branches by the same name: All the branches of bank has one unique & registered name.
3. Good relationship with central bank: In the branch banking system, Management has direct
relationship with central bank. Central bank also helps to clearing house.

5. 4. Control: All the offices of branch banking system are controlled by the policy of head
office.
5. Autonomy in branch administration: The manager of specific branch enjoys independent to
operate his own office. But the branch office has to maintain some rules, regulation and policies
to lend money.
6. Equality in interest: The rate of interest is same throughout the all branches. Bank gives
interest to the deposited money of their client in a specific rate. Also, charges interest to their
lend money
7. Sanctioning loan:
Chain Bank:
Conceptually chain bank is a form of bank governance that occurs when a small group of people
control at least three banks that are independently chartered. Usually, the controlling parties are
majority shareholders or the heads of interlocking directorates. Chain banking as an entity has
declined with the surge in interstate banking.
M. C. Vaish says about chain bank “The main features of the chain banking system is the control
of two or more banking companies by a single person, by members of the same family, by the
same group of persons through the ownership of stock, through the common membership on the
board of directors of the bank”
Features of Chain Bank:
1. It is the combinationof personal, familybased, or equal persons banking system.
2. In that case each bank have some different managing board and rules.
3. Its ultimate goal is to continue a vast banking system with the help of all.
4. To continue combine work, a monitoringboardcan be establishedthat will maintain
less law.
i. Nature: Chain bank is associated with individual, family and similar kind of people.
ii. Objectives: The main objective of the bank is to create the greater value for mutual benefit
by the co-operation.
iii. Ownership: The ownership of chain banking is limited to a family, individual, or similar
kind of shareholders.
iv. Economic ability : The economic ability of this bank is limited
v. For the existence in the competition some bank agreed on a single management. It
increases their economic capability by the mutual co-operation of small size bank.

6. 6. Board of director: To operate the banking activities, Chain bank also forms board of
director.
7. Separate entity: Each bank has separate entity in this kind of chain bank.
Advantages of Chain Bank:
1. Maximization of profit: A small commercial bank can maximize their profit by joining in a
chain banking system.
2. Mutual co-operation: In chain banking system one bank provides financial & others
assistance to another bank when they need help.
3. Publicity: It helps to advertise the company properly. Because all the bank of chain banking
system use one unique name.
4. Contribution to the economy: Chain banking system has great impact on the economic
development of a country.
5. More employment: It creates more employment opportunity by merging the two or more
small bank to a single banking corporation.
Disadvantages of Chain Banking:
1. Autocracy: It creates autocratic means of banking
2. Dependence on other: In this system one bank is dependent on others.
3. Excess Fraud: There is excess fraud.
4. Risky
5. Conflict: It creates conflict when management distribute profit to one another.
Group Bank:
Group banking is offered by some banks to incentivize a whole group of people, like employees of a
company, to have a relationship with the banking institution.
M. C. Vaish says about group bank “Group banking is a legal form of bank organization in
which two or more independently incorporated banks are controlled by a holding company”
Shekhar & Shekhar says about Chain bank “According to holding company, a group of bank are
brought under one centralized management and this centralized management exerts control over
all the units”

7. Features of Group Bank:
Group banking system has some unique features. These features are described in below:
1.Nature: In group banking system, Holding company and subsidiary company create a group
together. In this holding company enjoys the control of bank because they owns the maximum
share of company.
2. Objectives: The main objectives of this bank is to create strong banking network by
merging the small branches of bank.
3. Management & control: It has separate management & control. But the maximum control
of this kind of bank is associated with holding company.
4. Nature of Holding company: Group banking is associated with one holding company.This
holding company may or may not be a bank.
5. Extensive operation: Group bank can lend consortium for investment & giving loan.
6. Name & Goodwill: All the subordinates bank of group banking system use their unique
separated name. They operate their banking activities by their company’s own name, not by their
group name.
Advantages of Group Bank:
Group Banking is the system in which two or more independently incorporatedbanksare brought
under the controlof a holding company. The holding company may or may not be a banking
company. Under group banking, the individual banks may be unit banks, or banks operating
branches or a combinationof the two. The following are the advantages of the Group Banking
System:
1. Centralized Administration: The participating banks enjoy the benefits of centralized
administration.
2. Enhancement of operational efficiency: Because of Group banking system, the operational
efficiency of participant banks is enhanced through shared knowledge and experience.
3. Broader market: Group Banking offers broader market to the small banks for their excess
resources. Thus, their earning capacity and network improved.
4. Mobility and transfer of resources: In the case of crisis, the funds are transferred among
participating banks. This helps them to face the financial crisis if any, more effectively

8. 5. Large scale operation: Group banking paves the way for large scale operation. The member
banks can get the economies of large scale operation.
6. Other Benefits: The holding company offers the following services to the participating banks:
(i) Guidance of experts
(ii) Auditing
(iii) Investment counseling
(iv) Combined Purchase of stationery and office equipment
(v)Insurance cover ondeposits
(vi) Advertisingand publicity
(vii) Tax guidance
(viii) Other advisory services.
Disadvantages of Group Banking:
The disadvantages of the Group Banking Systemare as follows:
1. Lack of effective management and control:Under Group banking systemthe controland
management is not effective because the controlis indirect and more flexible. It cannot offer
specialized management.
2. Inefficiency of member banks protected:The inefficiency of one participatingbank affectsthe
other participating banks.
3. Less facilities: This systemcannot provide all the facilitiesofferedby branchbanking.
4. Cannot mobilize funds: Group banking does not have the capacity to mobilise funds as in the
case with branch banking.
Hence, it cannot offer the same economy of operationsas are offeredby branch banking.
On the structuralview of organization, Banking system is classified into Unit bank, Branch Bank,
Chain Bank, and group Bank. These entire Bank have remarkable contributionto the economic
development of a country.