SBI is shutting down its branches like never before. Here’s why

In the backdrop of cost rationalisation, the State Bank of India (SBI) is shutting down around 30 per cent of its branches, relocating and even consolidating few branches.

The SBI, which has around 24,000 branches under SBI Group, has been advised by global management consultant McKinsey to do so to remain competitive.

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

In a bid to cut costs, SBI has already shut down or relocated over 400 branches and has slowed down in adding more branches. While SBI added 1,053 branches in FY14 that number fell to 464 in FY15.

Also, SBI will see merger of five associate banks and 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. With the associate banks now coming in, there will be a scope for branch rationalisation on a much larger scale,” Kumar told ET.

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.