Union Bank slows down its branch expansion plan

In last two years state-owned Union Bank of India has opened around 310 branches across the country. Since April, the bank has opened 200 branches and will be adding only a few more to its network of over 2,500 branches.

But now due to the scarcity of trained staff bank has slowed down its expansion plan, earlier bank had planned to open 500 new branches during the current fiscal.

The bank’s Chairman and Managing Director MV Nair in an interview told Business Standard, “These are difficult times. So, we want to save cost. In addition, though we are hiring, it takes time before the staff is properly trained to be posted at new branches”.

In June 2009 the bank’s operating expenses registered high at Rs 543 crore as against Rs 416 crore in June 2008 which is an increase of 35 per cent year-on-year. It is believed that the increase might be due to implementation of project Nav Nirman, this scheme was launched by Nair to place the Union Bank among the top three public sector banks by 2012.

The Union bank was one of the few banks who have plans to expand their branch network. The other banks are who plan to add more than 500 branches in 2009-10 are State Bank of India, ICICI Bank and IDBI Bank.

However these three banks are working on their expansion plans.

An IDBI Bank executive said, “Recruitments are less costly now. In addition, it is a good time to enter into property lease agreements as rates will go up soon”. IDBI Bank has planned to add 200 new branches between April and December this year, and will open the remaining branches in the fourth quarter. By the end of March, the former development financial institution had 595 branches.

ICICI Bank country’s largest private sector bank has obtained approval from the Reserve Bank of India for the opening of 580 new branches in 2009-10, is also trying to keep costs low while going ahead with its expansion plans.

The ICICI Bank sources said with the opening of new branches, bank will get current and savings account deposits or the low-cost deposits, the thrust areas identified by the new management.

To keep control on its cost bank will not be adding to its existing base of 35,000 employees. Also some of the branches are being restructured to decrease the size. According to two senior executives the size will be in accordance to the business expected from the branches. An executive informed, "For smaller centers, the area of the branch and number of staff there will be lower than what it would have been in the larger centers".

ICICI Bank Executive Director K Ramkumar informed, "We have transferred a lot of middle management people to go to the branch leadership areas with their number being 350-450. This will result in our branches being manned by reasonably senior people".