Under branch banking system, the financial resources collected in the smaller and backward regions are transferred to the bigger industrial centres. This encourages regional imbalances in the country. Under branch banking system, the losses and weaknesses of some branches also have their effect on other branches of the bank.
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Rapid growth and wide popularity of branch banking system in the 20th century are due to various advantages as discussed below. Large financial resources and wider geographical coverage increases public confidence in the banking system.