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Business News/ Industry / Banking/  Brick-and-mortar branches still main source of business: bankers
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Brick-and-mortar branches still main source of business: bankers

Banks have quickened expansion in the last few years, opening 6,300 branches in 2012-13

Bank branches are central to the system while elements such as banking correspondents are add-ons. Photo: Mint (Mint)Premium
Bank branches are central to the system while elements such as banking correspondents are add-ons. Photo: Mint
(Mint)

Mumbai: Brick-and-mortar branches are still the main source of business for banks and will continue to service a bulk of their customers, despite the emergence of alternative channels such as the Internet and mobile banking, bankers said.

Banks have quickened expansion in the last few years, opening 6,300 branches in 2012-13, up more than fivefold from 1,200 in 2005-2006, according to a study by Boston Consulting Group (BCG) released at the banking conference in Mumbai organized by the Federation of Indian Chamber of Commerce and Industry (Ficci) and the Indian Banks’ Association (IBA).

The branch has maintained its importance despite ATMs and Internet banking helping banks reach out to more customers, said State Bank of India chairman Pratip Chaudhuri.

“Five years ago, people said the brick-and-mortar branch was doomed. Those people have now come back. For example, when we opened branches in areas like the North-East, Chhattisgarh, UP and Himachal, many people including myself questioned it saying there are no people there but the consumption story has made that move look far sighted," he said.

Bank branches are central to the system while elements such as banking correspondents are add-ons.

“Banking correspondents are complementary. If we have 500 branches, we can have another 500 correspondents, but at the end of the day a bank does not give loans through banking correspondents because we cannot give the responsibility of the loan to a correspondent. They are like mutual fund distributors, who help sell funds but do not manage the money," Chaudhuri said.

The BCG study also said that the proportion of cash in the banking system has increased despite the use of technology.

“Cash may have increased because of things like cash subsidies and because incomes have gone up," said Shikha Sharma, managing director and chief executive officer of Axis Bank Ltd.

“FMCG (fast-moving consumer goods) companies we speak to say that they are finding it tough to get rid of cash. Point-of-sale terminals of all banks are not yet profitable. We need a policy framework that not only talks about bringing costs down but allows setting up of an operating framework which helps us pick the right customers," she said.

The BCG study also pointed out that foreign banks in India have made better use of technology than their domestic counterparts.

Pramit Jhaveri, chief executive officer, India, at Citibank NA, said foreign banks had to use technology because branches in India were hard to come by.

“We have only 42 branches in India and total foreign bank branches are just 350. After a point we realized that this situation will not change and hence for us technology and digitalization have been facilitators of growth. It’s a question of incentivising clients to adopt technology because it helps banks to also reduce our cost per transaction," Jhaveri said.

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Published: 14 Aug 2013, 01:06 AM IST
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