The Hindu Business Line : The return of brick and mortar

Customers, who may be jostling with each other while operating their accounts out of crowded branches currently, may soon have the option of shifting to some roomier branch closer home.

" I have three banks within a five-minute walkable distance and another two banks besides a couple of ATMs within a 10-minute reach," says Mr K.M. Viswanathan, a retired Government servant in Velachery, a fast growing suburb in South Chennai.

A little over a decade ago that area was considered the "outskirts", with just two bank branches to service the local community.

Now, banks are rushing there to open branches and off-site ATMs as a real estate boom has seen new apartment complexes rise up.

That boom was at least partially driven by the easy availability of bank loans and relatively lower rates of interest. As new localities filled up, they became ripe for banks to unload other services to these customers and fuel the next boom.

Expansion plans

That may well be the story across the country as banks unveil a robust branch expansion programme.

Indian banks may open about 2,500-3,000 branches over the course of the next 12 to 15 months, going by the plans that a couple of banks are drawing up.

These branch expansion plans have to be submitted to the Reserve Bank of India. The approval, if it comes, is valid for one year and is given if the RBI feels comfortable with the bank's track record, corporate governance, compliance with rules and regulations, risk management and control systems.

The proposed branch expansion of Indian banks has to be seen in the backdrop of the recent trends in this regard. They are going to add in the next 12 months or so, what they added over four years to June 2006. The five top public sector banks alone may add something of the order of 1,000 branches next fiscal.

(To be continued)