SBI weighs plan to shut, relocate 30% of its branches

MUMBAI: State Bank of IndiaBSE 0.26 %, the biggest bank in the country, is considering a proposal to either relocate or shut down about 30% of its nearly 24,000 branches (SBI Group) to remain competitive as advised by global management consultant McKinsey.

While Mckinsey did not respond to ET's query, SBI MD Rajnish Kumar confirmed that the bank had hired Mckinsey for branch optimisation but did not offer any comment or detail about the size of the rationalization.

"We had engaged Mckinsey for branch and ATM optimisation and customer enhanced experience programme," Kumar told ET. "We have also engaged Accenture Financial services to draw up a plan on our InTouch branches."

As part of its branch optimisation measures, State Bank of India recently either shut down or relocated more than 400 branches to cut costs. The bank now has 16,784 branches and another 6,978 branches will be added to its network once the associate merger process is complete by this fiscal year-end. The bank has also gone slow in adding additional branches. While SBI added 1,053 branches in FY14 that number fell to 464 in FY15.

The bank added 451 branches at the end of the last financial year. SBI is currently gearing up for the merger of five associate banks and the scope for cost rationalisation is expected to increase further. SBI will merge all its five subsidiaries -- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad -- with itself. "Going forward, we need to be present where we need to," Kumar said. "With the associate banks now coming in, there will be a scope for branch rationalisation on a much larger scale." Kumar said there were several instances where SBI had 5-6 bank branches within 50 metres to 1 km (radius) and the bank would consolidate them depending on the business the branch generates. The bank has not arrived at how much costs it will save.

"Cost savings will definitely happen, otherwise why (would) you merge unless you can take benefit out of that synergy," said Kumar. "We are mapping how many branches overlap location by location and in another 15-20 days, we will have a fair idea on that." The bank is also looking at newer format for it branches. It has opened 133 InTouch branches which provides a variety of online services in self-service mode. When merged, the entity will be a banking behemoth with an asset base of Rs 37 lakh crore, branch network of nearly 24,000 and 58,000 ATMs.