State-owned Union Bank of India, which was planning to open 500 new branches during the current financial year, has scaled down its expansion plans due to the paucity of trained staff.
Since April, the bank has opened around 200 branches and will add only a few more to its pool of over 2,500 branches. During the last two years, the bank has opened 310 branches across the country.
“These are difficult times. So, we want to save cost. In addition, though we are hiring, it takes time before the staff is properly trained to be posted at new branches,” the bank’s Chairman and Managing Director MV Nair told Business Standard.
The bank’s operating expenses increased to Rs 543 crore in June 2009 against Rs 416 crore in June 2008 - an increase of 35 per cent year-on-year, mainly due to implementation of project Nav Nirman, a scheme launched by Nair to put Union Bank among the top three public sector banks by 2012.
The Mumbai-based bank was one of the few banks in the country which had chalked out major expansion plans. Apart from Union Bank, the other banks planning to add more than 500 branches in 2009-10 are State Bank of India, ICICI Bank and IDBI Bank.
These three banks are, however, going ahead with their expansion plans.
“Recruitments are less costly now. In addition, it is a good time to enter into property lease agreements as rates will go up soon,” an IDBI Bank executive said. Between April and December this year, IDBI Bank plans to add 200 new branches and will open the remaining branches in the fourth quarter. At the end of March, the erstwhile development financial institution had 595 branches.
The country’s largest private sector lender, ICICI Bank, which had received the Reserve Bank of India’s approval to open 580 new branches in 2009-10, was also trying to keep costs low while going ahead with its expansion plans.
The new branches would help ICICI Bank get current and savings account deposits or the low-cost deposits, a thrust area identified by the new management.
But to keep costs under check, the bank has decided not to add to its existing base of 35,000 employees. In addition, the size of some of the branches was also being scaled down. Two senior executives said that the size would be in line with the business expected from the branches. "For smaller centres, the area of the branch and number of staff there will be lower than what it would have been in the larger centres," an executive said.
"We have transferred a lot of middle management people to go to the branch leadership areas with their number being 350-450. This will result in our branches being manned by reasonably senior people," said ICICI Bank Executive Director K Ramkumar.
