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Private Banks lead the expansion of India’s Banking network

June 29, 2022

Private Banks lead the expansion of India’s Banking network
In the quarter ended March 2022, banks in India opened the highest number of bank branches in the last nine quarters, since the beginning of the covid-19 pandemic. Even as the pandemic fueled the growth of online banking services, brick-and-mortar industries are still crucial to financial integration in India, especially in rural areas.

Experience from the past five years shows, however, that nationalized banks, which dominate India’s banking sector and have historically led rural operations, are slowly expanding. And while private banks are taking the lead in branch expansion, the countryside via this road is not a priority for them. 
 
During the five-year period to March 2022, the number of functioning bank branches increased by 8% to 158,793. Notably, branches of nationalized banks decreased by 6.6% during this period when they rationalized their network following a stream of targeted mergers. By comparison, the branch network for private banks increased by about 40%. As a result, they continued their gradual increase in the share of the branch network, increasing from approximately 19% in March 2017 to approximately 25% in March 2022. 
 
Private banks have a distinct urban focus. Only about 20% of their branches are located in rural areas the smallest of the four geographical categories of bank branches defined by the Central Bank of India. As a result, private banks account for only 15% of rural bank branches in India. This is significantly lower than their share of 28% in semi-urban branches, 27% in urban branches and 36% in metropolitan branches. In order for the coverage in rural areas to be increased, state-owned banks must step on the pedal again or private banks must go out in a larger way. 

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