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Reaching out: is it slowing down?

The merger of five associate banks of State Bank of India and Bharatiya Mahila Bank with SBI is likely to dampen the expansion efforts. In the process of rationalisation, some branches of the associate banks are likely to be merged.

The total number of bank branches increased from 70,189 in June 2006 to 1,34,014 in June 2016. During those ten years the number thus almost doubled. Besides increasing the brick and mortar outfits, a new form of branchless banking was encouraged. 

However, in the last couple of years, the pace of growth slackened perhaps due to the growth of stressed assets and the shrinkage of the bottom lines. The decline in starting new branches started after 2013-14. The number of new offices reduced drastically from 10,269 that year to 7557 in 2014-15. There was a further drop to 5992 a year later.

With the wide variations in the size, heritage and age of various banks as well as the factors contributing to their entry into banking, there is no uniformity in their attitude towards spatial expansion. Like the State Bank, India’s biggest bank has always been in an expansion mode. It is omnipresent and is now planning to absorb five of its subsidiaries. Hopefully,  in the process of merger, the number of branches will not be slashed.  In the strategy of reaching out to the unreached, namely those who are still outside the reach of banks, reducing the number of existing branches would be a retrograde step.

Public sector banks, which account for 49 per cent of the total branch network do not exhibit enthusiasm in opening more branches. Even the private sector banks, whose share in the current branch network is not more than 16 per cent, are not willing to play ball. They are investing more on the digitisation of banking operations.            

Recently a new species called small finance banks entered into business. They have started opening branches. It may take longer time for them to have a sizeable number. Their contribution to the banking sector’s efforts of reaching out would not be significant in the short run. Bigger and older banks, have to expand their branch network to keep alive the process of reaching out. 

 

Closure of branches...

The recent merger of five associate banks of State Bank of India and Bharatiya Mahila Bank with SBI is likely to dampen the expansion efforts. In the process of rationalisation, some branches of the associate banks are likely to be merged. It is probable that over 1500 branches may get closed. How long it would take for them to open another 1500 branches is an imponderable question. There could be a significant number of unemployed bankers, despite the initiation of the VRS. Small finance banks and payment banks cannot absorb these bankers.

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