HDFC Bank set to open rural one-man branches

HDFC Bank, the second largest private sector lender in the country, is set to open one-man branches in rural centres. The move will help the bank meet priority sector commitments and aid its financial inclusion drive.

"We have already started it on a pilot basis in some villages. These branches will be operated by a single person. They will be open for a few hours in a day or for a few days in a week, depending on the local requirements," a senior executive said on Monday.

The branches would initially provide the basic banking services, such as cash deposits and withdrawals, fund transfers and loans to locals. ICICI Bank, the largest private sector bank in India, is adopting a similar model to expand its reach in rural centres.

According to bankers, this strategy will also help reduce dependence on Business Correspondents (BC). A BC is someone who works closely with an institute to promote, expand and advance the growth of the institute.

Bankers feel outsourcing of banking services increases the scope of operational and reputational risks for banks. By having own branches, lenders can control and monitor their operations relatively better. "We started using the BC route about six years before. While those partnerships continue, we are focusing more on direct lending through our own bank branches," the official said.

In 2011-12, while HDFC met its overall priority sector target, it did not in some sub-sectors. The bank has 2,544 branches and 8,913 automated teller machines (ATMs) across 1,399 cities.

Earlier this month, the Reserve Bank of India (RBI) had asked the state-level bankers' committees (SLBCs) to prepare schedules for covering all unbanked villages with a population of less than 2,000. SLBCs are to then notionally allot these villages to banks for providing financial services in a time-bound manner. RBI is to issue a detailed guideline soon.

In the current schedule for providing banking services in every village with a population above 2,000, SLBCs had identified 74,414 of these, all allocated to banks, including regional rural banks, for providing financial services by March 2012.

Banks have so far covered 74,199 of these villages. Bankers estimate around 600,000 villages in India. Banks have 138,502 outlets in rural areas, including 24,085 rural branches and 111,948 BC outlets. No-frills accounts have expanded to around 99 million.