Page 48 - Banking Finance March 2019

ARTICLE

number and distance of branches situated surrounding to and these locations are not suitable for other business /
the existing branch etc. all these factors are to be verified commercial purpose. Hence, the percentage of rental hike
while reviewing the existing space of the branch premises. in ATMs space should be less and renewal period should be
more when compare to the normal bank branch, thereby
After review, spending amount on rent and electricity banks can reduce substantially in rent costs in off-site ATMs
overheads to a particular branch is economically viable to .
the bank or not, if not possibility of shifting of the branch to
other location or merging of the branch with nearest branch Merging of branches
to be explored. This role is to be entrusted to the controllers
The ideal distance between two branches of one commercial
of the bank. This type of review should happen on yearly
bank is in the range of 3 to 5 km in metros and in other
basis or before renewal of lease agreement with the locations 10 km due to more number of branches of other
landlord.
banks, availability of public transport system and own
transport of customers. In metro, urban, semi-urban
Searching for alternate premises branches are crowded in same locality and the pie of the
While searching new or alternative premises, factors to be total business is shared among the branches. In crowded
considered by the bank are amount of rent to be paid per places, competition among branches is more, growth of the
sq. ft., number of other bank branches located, number of business is nominal and in some cases stagnated and
business establishments, type of customers located, negative growth is observed.
potentiality for bank business, number of years to reach
break-even-point of the branch. Due to increase in alternate In few branches the growth is on account of inflation and
delivery channels of the banks and implementation of the not real growth. At these places, if banks are merged with
concept "bank customer not branch customer" etc, prime nearby branches, it gives not only savings in RTL costs but
locality is not a vital factor in selection process of the branch. also manpower costs to a large extent and optimum
If the bank chooses prime locality, cost of rent and electricity utilization of existing resources. Merging or shifting of the
cost will be more and there is also a problem of parking branches is one strategy to save the RTL overheads and
place. Hence, choosing an ideal location is to be made for manpower cost of the banks.
the branch premises based on business, cost and
convenience point of view to both customers and staff Hiring of unutilized own premises
members.
In some cases, own premises of the banks are underutilized,
due to decentralization of organization structure of the
Shifting of ATMs to the branch premises bank, decrease in business levels due to opening number of
To save the rent and other infrastructure facilities costs of other banks in surrounding places. If under utilization of own
ATM, ATMs are to be shifted to branch premises instead of premises is observed, bank should explore to hire the
ATM located near to the branch, if the branch is situated in premises to other commercial establishments, and thereby
prime location. This way, Cash replenishment costs can be it increases the revenue resources of the banks.
reduced and customers of the branch can be encouraged
to use the branch ATM instead of using branch for cash In case of rented premises, de-hire the excess premises to
requirement. Requirement of ATM space is normally 100 Sq. the landlord, thereby RTL will reduce to some extent. Due
Ft. , this space can be easily arranged by the branch in to increase in number of branches in surrounding areas,
premises instead of separate space for ATMs far away from introduction of central processing centres etc., reduction in
the branch. volume of the business / transactions and underutilization
of branch premises is observed. Excess space than the
Thereby the bank can be saving to a large extent on rent requirement of the branch is to be de-hired to the landlords.
and cash replenishment costs of ATMs located far away from This is to be reviewed by the branch managers of bank and
the branches. Percentage of enhancement of lease rent for also the controllers.
ATM premises is normally less when compare to the bank
branches, as ATM space normally requires below 100 Sq. ft. Continued in Next Issue

48 | 2019 | MARCH | BANKING FINANCE