Kathmandu. Although the number of banks and financial institutions has remained stable in recent times, the branch network has been continuously shrinking.
According to the available data, the number of banks and finance companies has come down from 107 till Ashad 2081 BS to 106 in Ashad 2082. The number remains the same at 106 as of mid-July 2082. Of these, 20 commercial banks, 17 development banks, 17 finance companies, 51 microfinance companies and one infrastructure bank are in operation.
Although the number of organizations seems to be stable, there has been a steady decline in the branch network. The total number of branches dropped from 11,530 to 11,526 in mid-July 2082. By the end of March of the current fiscal year, this number has further come down to 11,465.
In particular, there has been a decrease in the number of branches of commercial banks, development banks and finance companies. The total number of branches of these 54 institutions stood at 6,483 as of mid-March of the current fiscal year. Of these, 5,068 branches of commercial banks, 1,123 branches of development banks and 292 branches of finance companies are in operation. In the same period of the last financial year, the number was 6,504.
On the other hand, despite the decrease in branches, there has been a slight increase in the ATM network. The total number of ATMs has reached 5,261 till mid-March of the current fiscal year. The number was 5,242 in the same period of the previous fiscal year.
According to the analysis of the Rastra Bank, the main reason for the decrease in the number of branches in recent times is the rapid expansion of digital banking services. After the services like mobile banking, internet banking, ATM, Connect IPS have made daily banking transactions easier, the compulsion to visit branches even for small tasks has been removed.
With this change, banks have started focusing on network restructuring rather than branch expansion with the aim of reducing operating costs and increasing efficiency. This indicates that the Nepali banking sector is shifting from expansion to contraction. With the widespread expansion of digital banking in the coming days, the branch network is expected to shrink further.
Strategy of Banks towards Branch Merger
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Banks are now preparing to merge branches. Banks have a strategy to reduce operating costs and increase service efficiency by merging branches that are within the same area or have less turnover.
However, the regulator Rastra Bank has kept strict restrictions on branch reduction. The Rastra Bank has said that it is preparing to allow the reduction of branches only after studying the rationale of the requirement, the impact on the service recipients and the impact on financial access.
