HYDERABAD: Growth in the number of offices of Scheduled Commercial Banks (SCBs) hit a two-decade low of 1.2 per cent in FY18, shows latest RBI data. The last time office expansion stood at such a dismal level was in FY99. Addition of new offices implies more jobs, but considering the slump the banking sector has been facing in the past few years, growth in number of office expansions and new jobs remained lackluster.
According to the ‘Handbook Statistics of Indian States 2018-19’ released last Saturday, the 150 SCBs, including 21 public and 21 private sector banks, added a lowly 1,700 new offices in the past 12 months.
The latest statistics come at a time when banking penetration grew multifold with over 80 per cent Indians having a bank account now, implying that banks could have opened more offices to have more skin in the game. But that hasn’t been the case, it appears.
Sources said the slower pace of growth is due to two reasons. One, the increasing reliance of banks on technology (mobile apps, business correspondents taking banking to the doorstep etc) and two, RBI’s restrictions on weaker Public Sector Banks (PSB) freezing office expansion. Until a few months ago, 11 of the 21 Public Sector Banks (now down to 19 following the three-way merger of Bank of Baroda-Vijaya Bank-Dena Bank) were under the central bank’s Prompt Corrective Action, which prevented them from not only adding new offices, but also from enforcing rationalisation of existing ones.
The 1.2 per cent growth in FY18 may be an unsettling metric seen in recent years, coming after a robust increase in the past decade, but the sector witnessed even worse times when growth hit a historic low of 0.2 per cent in FY03. That puts FY18’s 1.2 per cent in the land of the respectable.
The high-growth phase between FY11 and FY14 saw banks adding offices at a healthy clip of over 8 per cent every year. However, following RBI’s asset quality review in 2015, things started going down.
Meanwhile, bank credit growth of all SCBs regained its double-digit growth, registering 11 per cent rise in FY18 at Rs 87 lakh crore. However, deposits growth is showing mixed signals. After registering a neat 12 per cent growth in FY17, possibly led by demonetisation-induced deposits, growth slipped to 6.6 per cent in FY18 at approximately Rs 114 lakh crore.
