Private banks taking branch route to expand deposit base

Indian banks, especially those privately owned, are adding branches at the fastest pace in several years to help garner deposits, upending conventional wisdom that increasing familiarity with digital modes of transaction will obviate the need for brick-and-mortar lender facilities.

India's largest private lender HDFC Bank added 39 new branches in the June quarter. It has already added nearly 1,500 branches alone in the fiscal year gone by, taking its total branch tally closer to 7,900. The lender's branch network has increased by more than 40% in the last three years alone.

These branches serve 85 million customers, and more than half are in semi-urban and rural areas. The bank would look to add 1,500 to 2,000 additional branches during the year.

"Branch banking is the fulcrum of our customer relationships, and we believe that a physical branch is extremely important to customers, especially in semi-urban and rural locations," said Sashidhar Jagdishan, MD, HDFC Bank in his annual note to shareholders.


"The concept of phygital branches will help us to be agile in meeting customer needs through digital transactions and at the same time give customers a sense of engagement and security with a physical touchpoint. Going forward the new branches, we believe, will be key to additional deposit mobilisation," Jagdishan added.

Peer private lender ICICI Bank added 174 branches in the June quarter taking its total network to 6,074. Last fiscal year it added 482 branches. In a recently held investor call the bank management indicated that they would continue to invest in growing their franchise.

Another private lender Axis Bank added 42 branches in the June quarter taking its branch tally to 4,945. The bank added more than 300 branches last fiscal year.

"Current financial year, we are looking at around 400 branches incrementally for the year and we will keep ourselves open for any kind of opportunity which further comes up," said Ravi Narayan, group executive at Axis Bank. "In terms of the job between the loans and the liability, that continues to be something that is playing out for the industry. Between the push towards increasing distribution as well as ensuring that the existing franchise is completely sweated out, we continue to be extremely positive about the deposit growth that we have."

IndusInd Bank which has 2,606 branches, has said it has 30 branches which are launch ready and another 27 where leases are finalised. It is aiming to add 250-300 branches during the course of the year.

"With continued investment in physical and digital distribution along with maturity of branches will aid our retailisation drive going forward," said Sumant Kathpalia, MD, IndusInd Bank.