Bank branch opening gathered pace in FY19; ATM network declines: RBI report

The pace of opening of new bank branches, which had moderated in the previous three years, reversed in 2018-19, according to Reserve Bank of India's Report on Trend and Progress of Banking in India. Banks collectively added 4,518 branches in 2018-19 against 3,938 in the preceding year.

More than 50 per cent of the new branches were opened in Tier-1 (population: 1 lakh and above) and Tier-2 centres (50,000 to 99,999); on the other hand, the shares of Tier-5 (5,000 to 9,999) and Tier-6 (less than 5000) centres declined.

"This is consistent with the banks’ policy of opening branches in high population density areas where they are likely to be more commercially viable while relying on BCs (Business Correspondents) to enhance their outreach in other centres.

"The revised guidelines on rationalisation of branch authorisation policy introduced in May 2017 has provided banks with the autonomy to decide their business strategy in facilitating financial inclusion," the report said.

Of the total 4,518 branches opened in 2018-19, Tier-1 and Tier-2 centres saw an addition of 2,114 (1,581 in 2017-18) and 515 (336), respectively.

Tier-3 (population: 20,000 to 49,999) and Tier-4 (10,000 to 19,999) centres saw an addition of 700 (567) and 359 (333), respectively. Tier-5 and Tier-6 centres saw lower addition of 379 (455) and 451 (666), respectively.

The share of Business Correspondents (BCs) in total banking outlets in rural areas remained around 91 per cent, and the number of urban locations covered through BCs recorded more than a three-fold rise.

As at March-end 2019, of the total 5,97,155 banking outlets in rural locations, the branchless mode (BCs) was at 5,44,666. The urban location covered through BCs stood at 4,47,170 (1,42,959 as at March-end 2018).

ATMs decline

The total number of ATMs (on-site and off-site) operated by banks decreased during the year. The report said this was partly compensated by growth in white label ATMs (WLAs), boosted by policy changes introduced on March 7, 2019, to enhance the financial viability of WLAs, such as allowing their operators to source cash directly from the Reserve Bank, offer non-bank services, and advertise non-financial products in their premises.

As at March-end 2019, the number of ATMs declined to 2,21,579 against 2,22,247 as at March-end 2018.

While private sector banks (PVBs) recorded an increase in their ATMs (from 60,145 as at March-end 2018 to 63,340 as at March-end 2019), public sector banks' (PSBs) ATM declined (from 1,45,968 to 1,36,098).

"This (decline in PSB ATM network) is partly due to the reclassification of IDBI Bank as a private bank. Adjusted for IDBI bank, the PVBs showed a reduction in off-site ATMs and the total number of ATMs, with no change among PSBs," the RBI said. WLAs ATM network increase from 15,195 to 19,507.

Notably, scheduled small finance banks operated more ATMs (1,720) than foreign banks (914) by end-March 2019.

Despite transactions at ATMs decelerating both in volume and value terms, they still serve as a universal medium for people to access cash. During 2018-19, the value of transactions that occurred at ATMs is 2.8 times that of Point-of-Sale terminals.

ATM distributional pattern

As per the report, the distributional pattern of ATMs of scheduled commercial banks (SCBs) remained broadly similar in 2018-19 to the previous year. However, rural and semi-urban areas, which had recorded marginal growth in the number of ATMs in 2017-18, experienced a decline in 2018-19. PVBs and foreign banks (FBs) continue to have more ATMs concentrated in urban and metropolitan centres, causing the skew.

Of SCBs total ATM network of 2,02,072 as at March-end 2019, metropolitan centres accounted for 28.1 per cent; urban (27.6 per cent); semi-urban (27.7 per cent); and rural (16.5 per cent).

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