Banking on branches

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: Is branch-banking still the best way to do business in India? Experts seem to believe so and point out that the predicted death of the branch network (with the arrival of banking on technology) is premature in the Indian context.

Rather, high-tech savvy foreign and private sector banks too are now demanding more branch licences from the banking regulator, Reserve Bank of India (RBI), to penetrate into un-banked areas in tier I and tier II cities.

Simultaneously, state-owned banks, which control over 70% of Indian banking, with more than a little help from technology, are now re-learning the branch-centric and personal approach to winning customers in a bid to reposition themselves to regain their lost shares in Indian banking.

“We are now focusing on branch transformation through innovation,’’ says Anil K Khandelwal, chairman & managing director of state-run Bank of Baroda.

The country’s largest bank, State Bank of India (SBI), recently opened its 10,000th branch in Puduvayal, Tamil Nadu, and boasts of being the only bank in India and the second in the world to have such a vast branch network.

The SBI Group now has over 14,000 branches and over 10,000 ATMs that are spread across the length and breadth of the country.

OP Bhatt, chairman, SBI, had earlier taken cognisance of the bank’s failure to effectively harness the vast branch network to maintain its leadership and had famously called for a “do or die” approach to expanding business, particularly in the retail segment.

However, he openly admitted the bank may not be able to equip all its branches in terms of high–tech services and bring them on par with its private and foreign counterparts as that would involve huge costs.

“I need a minimum of Rs one crore to upgrade some of the branches. If I want to cover a minimum of 1000 branches, it would cost Rs 1000 crore. Obviously, I cannot afford it in the short run,” Bhatt explained.

The bank feels it has the capacity to triple the existing size by making use of only rural branches and has launched a nation-wide programme to sensitise its staffers at the branch level in all directions.