Mumbai: HSBC Holdings Plc. will nearly halve the number of branch in India to 26 from the current 50 and turn its focus to retail banking through digital channels, the lender said on Thursday.
“This change reflects changes in customer behaviour, who are increasingly using digital channels for their banking," HSBC said in a statement.
The branches that are being closed service less than 10% of its Indian customers, the bank added.
The UK-based lender reiterated its continued interest in its India operations and said it would continue to invest in all business verticals in the country.
“This move aims to position our RBWM (retail banking and wealth management) business for the future, with the right mix of digital versus physical branch distribution. Customer expectations are changing rapidly and we need to adapt accordingly," Stuart Milne, group general manager and chief executive officer, HSBC India, said in the statement.
The bank said it would soon announce an expansion plan to cater to its top-tier clients and further technology deployment for the benefit of its retail customers.
“We are investing in HSBC Premier in India to enhance the range of products and services available to select customers with more sophisticated needs. We have a big focus on digital and will be investing more in digital technologies, particularly in the payments space,’’ said an HSBC spokesperson in an e-mail response.
HSBC’s move comes after another foreign bank, Singapore-based DBS Bank Ltd, announced a digital banking campaign last month, through which it will acquire and service retail customers through digital channels rather than branches.
DBS is targeting 5 million customers and a deposit base of ₹ 50,000 crore over the next five years through its mobile-only Digibank. The lender said the mobile application will allow individuals to access a wallet at first and then open a savings deposit account with the bank. The balance in the account will earn 7% interest per annum.
The race for digital supremacy in India comes as 11 payments banks are preparing to launch operations. These banks will have the infrastructure and technology to provide digital banking from day one. Private lenders and public sector banks have also stepped up their push for use of digital channels.
Among the various digital channels, the use of smartphones for transactions is the most popular in the country. Transactions on mobile phones have surged in recent months and most banks have been aggressively marketing mobile applications to their customers. Data from the Reserve Bank of India (RBI) shows that on a year-on-year basis, such transactions saw an over fourfold rise to ₹ 49,029 crore in December 2015, from ₹ 11,323 crore a year ago.
India was estimated to have about 220 million smartphone users in 2015 and a February report by networking solutions firm Cisco forecast this will jump to 651 million by 2019.
Experts believe that with the penetration of digital channels, branch banking will undergo a significant change. “There is clearly a focus on moving towards more digital for many reasons. The cost of digital banking is significantly lower than branch banking. Everybody has to move towards that to be more competitive," said Abizer Diwanji, leader of the financial services practice at consulting firm EY.
Diwanji added that for foreign banks that have a thin branch network in India, digital banking is most beneficial. “Foreign banks have a small number of branches but have high-end customers. Their ability to migrate to digital is much better," he said.
There are 46 foreign banks operating in India and most have a network of fewer than 50 branches. Some foreign lenders with a significant presence in the country are Standard Chartered Plc with 102 branches, Citibank NA with 45 branches and Deutsche Bank AG with 18 branches.
However, with digitization and the possibility of closure of branches comes the threat of staff layoffs. HSBC said that its move to shut branches will affect less than 1% of its employee base in the country. The lender has about 33,000 employees across its various operations in the country.
“A key priority is the fair treatment of our staff and we will do everything we can to assist affected employees during this business transition. Redeployment opportunities will be accorded to the affected employees," said the bank’s spokesperson.