The Hindu Business Line : Banks on branch expansion spree

Just before the year 2000, if you had asked bankers about branch expansion they would have responded that bank branches were "baggage". They were, to put it simply, passé. "Clicks" and "eyeballs", or "Net banking" is the future, they said.

Move forward to 2007, and you see the return of "bricks and mortar". Physical branch presence is sought after like never before. No one disputes the importance of Net banking or its increasing coverage — but every bank believes that the way to get there is to first have a more visible presence on the street.

Different banks have different explanations for their strategy; for some it is about plugging geographical gaps in their network; for some others it is responding to customer demand and the call of more business.

And for some it is consolidation and preservation of market share — as, for instance, Andhra Bank's move to further strengthen its home base of Hyderabad. The bank plans to open 18 new branches in the suburbs around Hyderabad where it already has about 131 branches.

Tote up the numbers and it appears that Indian banks, public and private, are likely to open about 2,500 to 3,000 branches across the country in the next 12 to 15 months.

State Bank of India, for instance, plans to open 150 new branches and upgrade about 350 extension counters into full-fledged branches.

Extension counters are basically started to cater to the needs of one major institution in a remote area — a hospital, a college or a factory. (No lending activity can take place at extension counters.) SBI opened about 80 branches last year.

Other top banks such as Punjab National Bank, Bank of Baroda, Bank of India and Union Bank will be opening 75 to 100 branches each over the next fiscal.

These banks possess licences from the Reserve Bank of India to open a similar number this fiscal and are likely to open these branches either before March 2007 or a few months thereafter.

Private banks too have recently quickened their branch expansion. There was a lull last year, when the RBI refused permission for branch expansion to some banks such as ICICI Bank and HDFC Bank, as they had violated "Know your customer" (KYC) norms.

That ban was lifted recently and the banks have resumed their expansion plans. HDFC Bank, for instance, has added 48 branches last quarter.

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