Digital transactions on the rise, but banks 'branch out' to drive growth

Banks have brought the focus back on physical network expansion as they aggressively open branches belying expectations that growing digital transactions could reduce the dependence on physical branches.

HDFC Bank is set to open 600 branches in semi-urban and rural areas over the course of fiscal year 2024, with more additions also planned in urban locales. ICICI Bank is also expected to open more than 500 new branches across geographies while Kotak Mahindra Bank will open 150 branches in the new fiscal year.

"In this year, the pace of branch addition has picked up significantly," said Sandeep Bakhshi, MD, ICICI Bank, during the post-earnings investor call. "We have added 480 branches in the year and out of that 180 have come in the fourth quarter. So, I think that's kind of a starting run rate and we should see significantly higher branch additions next year than what we have seen this year."

The private lender had 5,900 branches as of March 31, 2023.


Merger-bound HDFC Bank has been the most aggressive in this space. The bank added 638 branches during the March quarter, taking the total branch addition in the financial year 2023 to 1,479. The total branch network of the bank stands at 7,821. The bank is also planning to open 675 branches in FY24 in semi-urban and rural geographies.

"In FY24, we expect to continue the speed at which we have done over the last 15 months to 18 months," said Srinivasan Vaidyanathan, CFO of HDFC Bank. "We take stock of branch addition every quarter to see availability, market potential and identification of the market. The second exercise we do is to look back to see the performance of what we have already done and how that is progressing on the curve. The approach will continue subject to evaluation every quarter in terms of the trajectory that we are continuing that is yielding those results that we have planned for."

Another private lender Kotak Mahindra Bank has expanded its presence from five states in March 2022 to 10 states in March 2023 and added 252 BC branches.

"Conceptually, I don't think there is any change in the way in which we have carried out our branch expansion," said Virat Diwanji, branch banking head at Kotak Mahindra Bank. "Our focus on the metro continues since the proportion will be higher. We have done close to 100 branches in this last financial year. And going forward in fiscal year 2024 we would do close to around 150 more branches. So our strategy to do measured expansion on the network continues, keeping in mind how things are developing on the digital front."