Following are the main advantages of unit
banking:
1. Efficient Management: One of the most important advantages of unit banking system is
that it can be managed efficiently because of its size and work. Co-ordination and
control becomes effective. There is no communication gap between the persons making
decisions and those executing such decisions.
2. Better Service: Unit banks can render efficient service to their customers. Their area
of operation being limited, they can concentrate well on that limited area and provide
best possible service. Moreover, they can take care of all banking requirements
of a particular area.
3. Close Customer-banker Relations: Since the area of operation is limited the customers
can have direct contact. Their grievances can be redressed then and there.
4. No Evil Effects Due to Strikes or Closure: In case of there is a strike or closure of a
unit, it does not have much impact on the trade and industry. Because of its
small size. It does not affect the entire banking system.
5. No Monopolistic Practices: Since the size of the bank and area of its operation are limited,
it is difficult for the bank to adopt monopolistic practices. Moreover, there
is free competition. It will not be possible for the bank to indulge in
monopolistic practices.
6. No Risks of Fraud: Due to small size of the bank, there is stricter and closer control
of management. Therefore, the employees will not be able to commit fraud.
7. Closure of Inefficient Banks: Inefficient banks will be automatically closed as they would not
be able to satisfy their customers by providing efficient service.
8. Local Development: Unit banking is localized banking. The unit bank has the specialized
knowledge of the local problems and serves the requirement of the local people
in a better manner than branch banking. The funds of the locality are utilized for
the local development and are not transferred to other areas.
9. Promotes Regional Balance: Under unit banking system, there is no transfer
of resources from rural and backward areas to
the big industrial and commercial centers. This tends to reduce regional
imbalance.
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