Are rural centres with a population below 5,000 not attractive for opening new bank branches in the country? The number of branches opened by scheduled commercial banks (SCBs) in such centres (Tier-6 centres) between 2014-15 and 2017-18 is a sign of this trend.
According to the Reserve Bank of India’s ‘Report on Trend and Progress of Banking in India 2017-18’, SCBs opened 2,429 branches in Tier-6 centres (constituting 27.7 per cent of the total number of branches opened that year) in 2014-15.
However, these banks opened only 626 branches in Tier-6 centres (constituting 15.8 per cent of the total branches opened that year) in 2017-18.
The overall number of new branches opened in all centres (from Tier-1 to Tier-6) declined by more than 25 per cent in 2017-18, as banks with high stress on their balance sheets undertook branch rationalisation, including turning to business correspondents (BCs) to contain expenditure, the report said.
The number of brick-and-mortar branches and BCs declined in rural areas in 2017-18, partly due to rationalisation of branches by banks through closing down of branches that were either unviable or located in close proximity to each other. Some banks disengaged with corporate BCs due to their non-performance.
Though the overall number of branches opened by SCBs increased by 3.3 per cent in 2015-16, the number of branches opened in Tier-6 centres came down by 9.1 per cent that year. A total of 9,038 branches were opened in 2015-16 against 8,749 branches in 2014-15.
Of this, the number of branches opened in Tier-6 centres came down to 2,207 in 2015-16 from 2,429 in 2014-15.
The total number of new branches opened by SCBs decreased to 5,306 in 2016-17 and 3,948 in 2017-18. Of this, the number of branches opened in Tier-6 centres decreased to 915 and 626 during 2016-17 and 2017-18.