Several private sector banks are expanding their branch networks, with the number of branches growing 8.7% to 16,189 for the year ended March 31, according to data from S&P Global Market Intelligence. While private banks are expanding their physical presence, public sector peers are reducing the number of branches.
State-owned banks’ total branches declined to 59,238 as of March 31, from 61,031 at the end of the previous year, data show. The decline in the number of branches of PSBs, however, may be because of mergers, the report said.
Private banks continue to improve their branch numbers despite expectations that digitisation will do away with physical presence, the report said. HDFC Bank and Axis Bank have accounted for the bulk of that growth, with former’s branches expanding to 6,342 from 5,608, while Axis Bank’s branches increasing to 4,758 from 4,594.
Singapore-headquartered DBS Group, which acquired Lakshmi Vilas Bank, plans to expand to smaller cities, currently dominated by PSBs. Kotak Mahindra Bank had earlier said it was seeking to grow its digital footprint, but will also offer access to branches.
Higher number of branches will increase costs for these banks, although they can re-allocate staff from closed branches or upskill them to provide required services at branches, Nikita Anand, associate director at S&P Global Ratings, said.
On the digital front, both private and public sector lenders continue to focus on digital apps, allowing customers to conduct basic banking operations without having to step out of their homes, during the pandemic.
“Digital banking also got a boost from the COVID-19 pandemic, which forced lockdowns in several parts of the country,” the report said. However, physical branches are important to customers as they place about the same importance to mobile apps, the report said, quoting a Capgemini’s global banking report of 2022.