British banking major Barclays has decided to massively scale down its operations here by closing a third of its nine branches located in the non-metro areas, according to a bank source.
The bank has initiated the process of closing the Junagadh (Gujarat), Ahmednagar (Maharashtra) and Rajahmundry (AP) branches as part of its strategy to move away from the retail banking business here, the source said.
The closure will happen by early 2013 and the bank will be reduced to having just six branches in Mumbai, Delhi, Hyderabad, Pune, Bangalore’s suburb of Neelamangala and Kancheepuram in Tamil Nadu, the source said.
Though some job losses are unavoidable given the massive scale-down in branch presence, the source, however, was not forthcoming to put a number to it.
The bank, which is anyway facing high attrition as a result of the restructuring that began early this year, will try to accommodate as many employees as possible in other positions, the source said.
When contacted, a spokesperson for the bank said it is part of its strategy announced in 2010 to move away from retail banking to concentrate more on the corporate banking, investment banking and wealth management verticals.
“We took a decision then to sharpen our focus here on corporate and investment banking and wealth management and also to reduce over time our retail banking presence to a core network of branches serving the high net worth individuals segment,” a statement from the bank said.
However, it is not yet known whether the bank will have to face some regulatory headwinds as the closure of branches located in the non-metro areas.
Typically, the Reserve Bank allows a foreign bank to open an urban branch once it opens a rural/semi-urban branch and vice versa.
The source said all the factors would have been taken into account before the announcement, but conceded that the wishes of the RBI, which has been persistent in taking banking to the hinterland, may have prompted the opening of branches in such places.
As for the future of the remaining six branches and that of the retail vertical as a whole in the country, the source said “as of now” the branches continue to operate and also pointed to the benefit on the corporate banking and wealth management front the bank is getting through the retail presence.
The source said the negative events at the bank’s London headquarters, where it is embroiled in the benchmark rate Libor-rigging scandal, does not have any bearing on its decision to cut the branch presence here.
In June Barclays had said it would chop as many as 600 positions, mostly from the consumer banking division where as much as 400 positions were to be trimmed, by March 2013, while the non-banking finance arm would see up to 220 positions being lost.
These decisions were part of the massive rejig announced globally by the bank in December 2010 as part of its global cost cutting drive. As part of that in June it had culled around 30 jobs from the banking division.
Last July, Barclays India had said it would wind up its mid-corporate division here as cross-selling of investment banking and normal banking did not develop as expected and would sharpen its focus on serving the needs of large corporates, MNCs and FIs apart from investment banking.
The move also involved revamping its corporate finance business by merging the coverage (sales) teams of Barclays Commercial Banking and Barclays Capital under the investment banking arm, resulting in sacking some 25 people.
The banks had also announced winding up of its SME division to sharpen its focus on corporate lending.
The move to shut down SME division stemmed from the fact that Barclays was facing stiff competition from homegrown lenders like HDFC Bank, Kotak Bank and Yes Bank in this segment.
According to an RBI report, Barclays’ bad loans at Rs 1,422 crore were the second highest among foreign banks in the country just behind Rs 1,683 crore of HSBC in 2010.
As of March 2010, its outstanding loans were at Rs 7,600 crore against Rs 10,600 crore in the previous year.
In FY10, Barclays had loss of Rs 550 crore, against a net profit of Rs 30 crore in FY09. As of March’11, gross NPAs were at Rs 781 crore, which is a major drop from FY10 when its bad loans stood at Rs 1,400 crore.