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Harish Damodaran
K.R. Srivats

New Delhi, Jan. 11 Banking operations are getting more and more concentrated within fewer and fewer branches.

Currently, out of the 77,069 offices of scheduled commercial banks across the country, there are only 5,017 - 6.5 per cent of the total - having deposits of Rs 100 crore or more each.

But these 5,000-odd reporting branches accounted for 57 per cent of the aggregate deposits and 59 per cent of the gross credit disbursed by banks as on September 2008, according to the latest data compiled by the Reserve Bank of India (RBI).

Five years back, the top seven per cent bank offices cornered less than 49 per cent of the total deposits and 55 per cent of the outstanding sum lent out.

The RBI data, in fact, shows that the four metros, together with Bangalore and Hyderabad, now account for over 46 per cent of deposits of all scheduled commercial banks. Five years ago - as on September 2003 - this share amounted to 38.5 per cent.

What this points to is increasing concentration of banking business at fewer offices - so much so that more than 83 per cent of bank branches today hold less than 28 per cent of the outstanding deposits and credit extended.

Why is this happening? One explanation is that of the 77,069 offices of banks, almost two-thirds (49,213) are in rural and semi-urban centres with population of less than a lakh - a reflection of the conscious government policy to set up bank branches in remote areas.

However, given the limited commercial activity (linked, in turn, to lower population densities) in these centres, it is understandable why the 49,213 rural and semi-urban branches had a meagre 23 per cent share of aggregate deposits and 16 per cent in gross credit as per the latest compiled data.

But is there any other reason for the increasing concentration of banking business? According to a senior public sector bank official, it has largely to do with the client profile.

“Corporate client accounts are always handled from select branches, mostly based in metros. These branches accept bulk deposits, besides meeting the credit requirements of large public sector undertakings”, he pointed out.

Consolidation of business at a few branches also helps in treasury management operations of banks, “so that you can effectively track flow of funds, both incoming and outgoing”. It also facilitates better compliance with CRR (cash reserve ratio) and SLR (statutory liquidity ratio) requirements, he added.

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