Banks on branch expansion spree

Private banks have quickened their branch expansion programme to net the unbanked population across the country, officials said.

Some thirty private commercial banks (PCBs) have opened around 50 branches only during the time from November to December 20, 2008.

According to Bangladesh Bank (BB) data, the central bank has granted licences to 30 PCBs to open around 150 branches by this year.

BB officials meanwhile said the demand for new branches is increasing this year like never before.

“No one disputes the importance of online banking or its increasing coverage, but every bank believes that the way to get there is to first have a more visible presence on the street,” said Muhammad A Rumee Ali, chairman of BRAC Bank and a former deputy governor of BB.

Rumee Ali said: “I don't think it's possible to provide full banking services without physical presence.”

BRAC Bank has got BB approval to open the highest number (20) of new branches in 2008 followed by Dutch-Bangla Bank with 15 branches. No other banks got permission to open more than 10 branches, according to BB data.

As of October 31, 2008, 48 Bangladeshi banks that include four state-owned, 30 PCBs, nine foreign and five specialised banks have a total of 6,789 branches. The number was 6,562 at the end of 2006 and 6,402 in 2005.

“The number of total branches will be around 6,850 at the end of 2008,” a senior BB official said.

Different banks have different explanations for their branch expansion strategy. For some it is about plugging geographical gaps in their network, for some others it is a response to customer demand and the call for more business.

“Business is the prime objective of any branch expansion. A branch needs to generate income, otherwise it will be shut down,” Rumee Ali said.

Helal Ahmed Chowdhury, managing director of Pubali Bank, which would have 371 branches at the end of 2008, said a bank needs to assess business potentials before opening a new branch.

Pubali Bank got permission to open 10 new branches this year, of which seven rural and the remaining three are urban branches.

“Now we consider economic activities and remittances before opening a new branch,” Chowdhury said.

There will be more branches as new areas are becoming urbanised, he added.

Responding to a query, he said a branch requires only one year to make profit.

“An urban branch generates quicker profit than a rural one,” Rumee Ali said.

Source: The Daily Star, December 23, 2008