IDBI Bank's changing strategies
It has dawned at last, albeit bit too late! The Rs. 478.92 crore income IDBI Bank Ltd., a new- generation private bank, has finally included branch expansion as the core for its future growth. Says Mr. Gunit Chadha, the bank’s new managing director and chief executive officer, "Branch expansion to improve our reach is the corner stone of our new business strategy." Mr. Chadha took over the reins at IDBI Bank a couple of months ago, after spending 16 years with Citibank. He now wants to increase IDBI Bank’s branch network to 110 by the end of next fiscal. Presently the bank has 45 branches. His immediate goal is to add 10 more branches by the end of this fiscal. Though it was initially thought that the entry of new private sector banks would spell the end of brick and mortar banking, it has become increasingly evident that the presence of a physical branch in major localities is most important for growth. IDBI Bank's decision to expand its reach has come not a day too late since its peer, ICICI Bank, has already taken a great lead in this regard and is fast expanding its tentacles. The latter already has a network of 103 branches, 25 extension counters and 321-off and on site ATM's. The off-site ATM is an innovative idea of ICICI Bank to capture savings bank accounts - which are far cheaper than other accounts- in bulk. Compared to this, IDBI Bank's brick and mortar infrastructure pales into insignificance. But part of the reason for that may be attributed to its focus on corporate banking, while ICICI Bank went all out to be a major in the retail segment as well. Speaking of the economics of investing in a physical branch Mr. Chadha hopes to recover the investment in 12-18 month period. While the per customer servicing cost might be higher in case of a physical branch, the cost of acquisition of a customer is far more cheaper than other forms. Again, to keep pace with the industry trend and drive down transaction costs, IDBI...
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