With the increased use of digital banking channels, the number of branches added by public-sector banks (PSBs) and private banks hit an eight-year low in FY17, show data released by the Reserve Bank of India (RBI). The number stood at 4,023 for the full year, the lowest since FY09 when 3,536 branches were added.\u00a0Demonetisation, announced on November 8, 2016, and carried out thenceforth up to December 31, 2017, may have pushed people towards digital payments. Simultaneously, the note-exchange exercise took up much of banking staff\u2019s time and energies, leaving banks with relatively lesser bandwidth to open new branches. FY17 saw PSBs open a larger number of branches than their private peers. Together, they added 2,156 branches, accounting for 53.5% of the total additions in the fiscal. State Bank of India (SBI), along with its then associates, added 531 branches, followed by ICICI Bank and Axis Bank, which added 400 branches each. FY18 may see a further reduction in branch additions for at least two reasons. First, following the merger of SBI\u2019s associates and Bharatiya Mahila Bank with SBI, a rationalisation exercise has been carried out throughout the year by the country\u2019s largest lender. Second, 11 PSBs \u2014 roughly half their total strength \u2014 are now under the RBI\u2019s prompt corrective action (PCA) framework, which requires them to curtail branch expansion. Banks are also seeing a rebalancing of the mix between physical and digital transactions. In November, SBI chairman Rajnish Kumar had said SBI sees only 22% of its transactions happening at branches. Of the remaining 78% that are non-branch transactions, 36% are digital transactions and the rest are ATM transactions. \u201cGoing forward, I don't foresee that this 22% is undergoing a major change,\u201d Kumar had said, adding that there may be some change in the composition of ATM and digital transactions. Cost control has, of course, been an important factor for lowering branch expansion. Paresh Sukthankar, deputy managing director, HDFC Bank, told analysts after the bank\u2019s Q3FY18 results that increased digitisation and slower branch addition had helped optimise costs. \u201cThe increased digitisation has helped us both in terms of improved efficiencies and improved productivity on the sales side, lower costs on the credit and operations side, especially as higher and higher proportions of our origination are capable of being processed either straight through or at least some components of it being processed on a straight-through basis,\u201d Sukthankar said, adding, \u201cWith incremental branch expansion slightly lower than what it used to be and earlier branches, which are now two to four years old, gradually getting into higher productivity levels and, therefore, reaching break-even, both of those are contributing.\u201d HDFC Bank added 195 branches in FY17.