Public sector banks (PSBs) have substantially slowed the pace of branch expansion in the past three years on higher use of digital banking, expansion of business correspondents’ network and need to cut down costs. While 4,000 branches were opened in 2015, the number dropped to 3,334 in FY15 and 3,334 in FY16, 2,185 in FY17 and just 824 in FY18, according to data in Parliament.
With more emphasis on financial inclusion, especially in unreserved and underserved areas, shift has been on getting business correspondents.
A senior official with Indian Bank’s Association (IBA) said the banking sector reached a certain level of saturation — in terms of branch network — and it is natural that the pace of opening new branches will slow down. Now, the focus is shifting to optimum use of various channels — branches, alternate channels such as ATMs and digital banking.
State Bank of India (SBI) too has reduced the pace of opening new branches, after its associates banks were merged with it in 2017-18. It will open about 250 branches annually, as against the earlier 750-800 by the group. It had rationalised about 1,600 branches in the network last year and this would be regularly reviewed.
On the impact of the shift towards digital banking, SBI chairman Rajnish Kumar had said physical contact points will still be needed because India is a huge country.
Reflecting on the technological developments and network expansion of business correspondents in May 2017, the RBI moved from concept of branch to outlets, a more broad-based framework, to assess reach of banking and financial services, for financial inclusion.
New outlets would mean a fixed point service delivery unit, manned by either bank’s staff or its business correspondent. At this unit, services such as acceptance of deposits, encashment of cheques, cash withdrawal or lending of money are provided for a minimum of four hours a day for at least five days a week.
Banks will focus on quality of reach and customer service than just presence in the neighborhood.
Weak financial conditions are forcing banks to have a relook at branch network. In fact banks are now in the midst of rationalising existing branches — while some have closed down, others have merged. Ailing public sector lender Dena Bank closed 14 branches and 39 ATMs in the first quarter ended June 2018.
Senior PSB executives said banks are bleeding and have to look at areas where they can rationalize operations for saving expenses. Of course, the priority will remain continuity of service to customers and care would be taken that they are not inconvenienced, they said.