Chain Bank is a system under which different banks come under a common control through common shareholders or by the inter-locking of directors. An example in India is KarurVysya Bank and Lakshmi Vilas Bank having their head offices located in the same place, viz., Karur and sharing common directors by which they may have common management policy.
Merits of Chain Banking: Following are the advantages of Chain Banking system:
1. This system of banking is found most suitable to meet the local needs of credit and finance;
2. The system facilitates appropriate use of the limited resources.
3. The chain banking system exhibits efficient system of management;
4. This system is not prone to risk-taking;
5. It is the cheap system of banking and not too much expensive.
Demerits of Chain Banking: Chain Banking system has certain demerits:
1. Profitability remains limited due to limited risk-taking.
2. The chain banks generally do not conduct the programmes of social welfare and development;
3. This system of banking promotes the tendency of bossism in management.
