Branch banking: the new paradigm

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The significance of the simultaneous opening of 101 branches by the country’s premier commercial bank, SBI, has eluded most of observers and commentators. While it may be a bit of a hyperbole to say that the event marks a big bang return of brick & mortar banking, it is almost certainly a statement in bold relief of the continued importance of spatial presence of commercial banks across various geographical locations.

This also by itself is an eloquent and resounding rebuttal of the supremacy of virtual banking anchored around state of the art IT backbone, over conventional branch driven banking. This should silence the vocal votaries of wired banking, who have been writing the epitaph of conventional banking on the basis of their view of the evolving banking scenario through a limited aperture of relative success of a couple of banks.

This event has constituted a re-entry vehicle for SBI, the public sector banking behemoth, into the centre stage to reclaim its rightful place.

Tomes were being written on redundancy of the public sector banking business model, especially in the context of the present financial and banking ambience, both domestic and international.

There is no gainsaying that government sector banks suffer from certain inherent shortcomings and inadequacies. Some of these could act as serious impediments to their competitive edge in the market place, diluting their standing in the financial architecture of the country. A highly regimented control apparatus, archaic internal guidelines, evolved principally to keep at bay subsequent investigation by the state’s punitive machinery of purely commercial decisions, rapid depletion of quality human resources pool are some of these.

However, it must be conceded that the top management of these seriously disadvantaged banks, backed by some real time solid support from the government, initiated and implemented a policy package, which to a large extent contained the fallout.

In the process they came up trumps by turning out excellent performance, continuously for the past 3 to 4 years. Notable among them have been PNB, Union Bank, Bank of India, and Bank of Baroda, apart from the ubiquitous SBI. One can only appreciate that if these banks had the flexibility of the foreign and private sector banking counterparts, they could have done considerably better and reasons for this are not far to seek.