It’s too early to write an obituary for bank branches and ATMs in India: Axis Bank

Too soon for goodbyes?
Too soon for goodbyes?
Image: Reuters/Adnan Abidi
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The death of physical banks in India over the next five or six years is something that was predicted by many experts.

Yet, the country’s third-largest private lender, Axis Bank, continues to strengthen its brick-and-mortar network. While it had 3,304 branches and 14,163 automated teller machines (ATMs) at the end of financial year 2017, it plans to add around 400 branches this financial year. This despite the fact that 66% of its transactions were digital (mobile and internet) in the previous fiscal.

Rajiv Anand, the bank’s executive director for retail banking, believes physical branches are key to strengthening its presence in the hinterland.

Meanwhile, as it piled up bad assets in the corporate loan book, the bank’s retail portfolio grew in double digits—advances at 27% and deposits at 18%—in financial year 2017. Now it is looking at growing in niche areas that others typically avoid: education loans and super bikes.

Anand recently spoke to Quartz on the bank’s plans. Edited excerpts:

With corporate loans being sluggish, banks are focusing on retail. How’re you tackling competition?

It’d been our strategic intent since 2010 to try and increase the share of our retail book. At that time, retail assets were about 20% and now they are at 45%. We are (now) looking to widen our retail portfolio. Earlier, within retail, 65% of the portfolio was concentrated on housing loans; now it has come down to 45%. That’s because we are growing (in) vehicle loans and personal loans. We also have…small business loans, education loans, and micro-finance. These will help us grow in the coming days.

Most banks are skeptical of lending for education due to high levels of bad loans. How do you take care of this?

Primarily, you pick the right institute where employability is good. That’s where we are focusing. However, [it’s] still early days and we will see how it shapes up.

The increased focus on unsecured retail loans (personal loans, credit cards) by banks has set off alarm bells at the Reserve Bank of India. Do you see a problem?

Our retail book continues to be relatively small and a large section of the customer base remains untapped. We have the risk controls in place, so I am not worried. Overall, there will always be some segments and pockets of risks. One must be careful about the geography, customer type, and even some portfolios. If they exhibit heightened levels of risk, it is wise to stay away.

Recently NITI Aayog said physical branches will be dead in the next five-six years with the rise of online banking. Do you agree?

I don’t believe it is an either-or question. We opened 400 branches last year and we plan a similar number (for) this year as well. We need to provide an omnichannel experience to customers. Customers continue to access us via digital channels, branches, and call centres. As you move towards the hinterlands or smaller cities, a physical presence is important. It helps build trust and acquire new customers. Moreover, corporate customers, especially the ones in the small-and-medium enterprise segment, who even today predominantly deal in cash, do wish to visit a bank branch for their needs. Therefore, it is premature to talk of the death of branch banking or ATMs.

Now that cash is back in circulation, have the numbers of online transactions decreased?

The number of digital transactions has come down but it hasn’t reached the pre-demonetisation levels and that’s the key part. The number of transactions trebled from the October levels in Nov-Dec due to the cash ban. Now, instead of a 200-300% increase from that level in the months after the note-ban, the rate of growth has settled at 50-60%. This is equivalent to the growth that we had seen in [the] last two to two and a half years.