Public sector banks on branch expansion spree

BL : NSVageesh&Vinayak :10 july 2012

Some 5,000 branches added in 2011-12; five banks account for about half the number

MUMBAI/MANGALORE, JULY 9: 

Public sector banks are coming ever closer to you. Just in case you haven’t noticed, you may find another new branch opening shortly in your neighbourhood. Never mind all the talk about more ATMs or improved Internet banking. Brick and mortar is very much in.

Public sector banks (PSBs) added about 5,000 branches in 2011-12. That should benefit an estimated seven crore customers in the country.

About half the new branches (around 2,500) were added by just five banks — State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank and Indian Overseas Bank.

Banks have been on a branch expansion spree over the past few years with the number inching up every year. In 2006-07, they had opened a little over 1,500 branches while in 2008-09, the year of the global banking crisis, they opened nearly 2,400 branches.

Currently, there are over 65,000 public sector bank branches in the country. That number could again shoot up this year if early indications of branch expansion plans are anything to go by.

Many banks have announced plans to open more branches. Allahabad Bank, for instance, plans to open 250 branches this fiscal, more than double of what it did last year. Similarly, Corporation Bank plans to open 300 branches this year compared to 139 last fiscal.

New branches are opened by some banks to acquire a ‘pan-India’ presence. Although owned by the Government, PSBs have had their special pockets of influence and regional biases owing to their private sector origins.

That is now being evened out as banks venture consciously into States and territories outside their comfort zone.

The pressure of competition and good business opportunities, thanks to new residential colonies and industrial parks springing up in various States, have seen banks expanding their network.

Recently, the Reserve Bank of India relaxed the norms for branch licensing and encouraged banks to open more branches in tier-2 centres (cities and towns with a population of between 50,000 and 1,00,000).

Despite these efforts, the penetration of banking services in the country is still low.

An average branch services around 13,000 customers, indicating the demand for services and the potential still available. Nearly 60 per cent of the population does not have access to banking services, according to RBI reports.