Bank branch expansion at a decade's high

State-run and private sector banks together open 7,300 branches in 2013

The growing popularity of alternative banking channels has failed to discourage lenders from setting up brick-and-mortar branches across the country.

State-run and private sector banks have opened a little more than 7,300 branches during calendar year 2013. This is the highest yearly number in the past decade.

Bangalore-based Canara Bank set up 723 branches in 2013, while State Bank of India, the largest lender, opened 627. Among private lenders, ICICI opened the highest number, 587.

The majority of branches were opened in non-metropolitan locations, as lenders focused on expanding the reach in unbanked and under-banked regions. HDFC Bank, the second largest private lender, opened 333 of its 339 new branches in rural and semi-urban centres. About 80 per cent of Canara Bank's new branches were outside metro and urban locations.

“There is a need to improve our geographical reach. Hence, banks are trying to cover areas where they were not present earlier. We cannot service the rural population with alternate banking channels like mobile and internet banking. We need to have physical presence and, therefore, are expanding our presence in deep geographies,” M Narendra, chairman and managing director of Indian Overseas Bank, told Business Standard. The Chennai-based state-run lender set up 324 new branches in 2013, of which 215 were in rural and semi-urban locations.

Bankers say the government's financial inclusion programme that aims to provide banking services across 625,000 villages has also led to the increase in numbers of rural and semi-urban branches. “There are still a little over 300,000 villages that do not get banking services. Banks are expected to have presence across these villages in the next two and a half years. Hence, banks will continue to open more branches in these areas for the next few years,” said Shubhalakshmi Panse, chairperson and managing director of Allahabad Bank.

Bankers said the Reserve Bank of India’s decision to relax the branch licensing norm had aided their expansion. Earlier this year, the banking regulator had relaxed the branch authorisation policy for Indian banks. It allowed lenders to freely open branches in tier-1 to tier-6 centres without prior permission from the central bank, subject to certain conditions.