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The Union Finance Ministry has advised public sector banks (PSBs) to increase their number of branches, especially in areas where private banks and small finance banks (SFBs) are rapidly growing. A senior government official shared this direction, explaining that PSBs need to compete more actively in branch expansion to stay relevant in a changing banking landscape.
Why This Expansion Is Needed
Private banks and small finance banks are opening branches at a fast pace, and the government wants PSBs to match that level of growth. According to the official, “Banks have been asked to identify potential areas and open new branches, especially to counter the aggressive expansion by private sector banks and small finance banks.”
How Many Branches Were Opened in FY 2024–25 (Till December 31, 2024)
Till 31 December 2024, Public Sector Banks have opened 1391 new branches whereas Private Sector Banks have opened 1552 branches. The detailed list as given below:
- Public Sector Banks (PSBs):
Total: 1,391 branches- Metropolitan areas: 271
- Urban areas: 311
- Semi-urban areas: 539
- Rural areas: 270
- Private Sector Banks:
Total: 1,552 branches- Metropolitan: 545
- Urban: 466
- Semi-urban: 318
- Rural: 223
- Small Finance Banks (SFBs):
Total: 1,272 branches- Metropolitan: 197
- Urban: 260
- Semi-urban: 626
- Rural: 189
- Regional Rural Banks (RRBs):
Total: 61 branches
As the numbers show, private and small finance banks are opening more branches, especially in urban and semi-urban areas. Let’s have a look at the bank wise data of opening of new branches by private banks:
- HDFC Bank: 421 branches (137 metro, 168 urban, 98 semi-urban, 18 rural)
- ICICI Bank: 249 branches (83 metro, 91 urban, 36 semi-urban, 39 rural)
- Axis Bank: 337 branches, including 107 in rural areas
- Kotak Mahindra Bank: 72 branches (mostly in urban/semi-urban areas)
- Mahindra Bank: 13 branches
- Other private banks: 460 branches combined
In total, private banks opened 1,552 new branches, with the largest share in metro cities.
Why Physical Branches Still Matter
Even though PSBs have improved their digital banking services, the Finance Ministry has emphasized that physical presence is still very important. According to the official, “Having more branches helps banks build trust with customers, offer better service, and collect more deposits.”
This was also highlighted by Finance Minister Nirmala Sitharaman, who recently said that India’s financial future would be “phygital”—a mix of physical and digital services. She stressed that while technology is important, face-to-face service builds long-term relationships with customers.
Focus on North-Eastern Region
The Finance Ministry has also instructed PSBs to increase banking presence in the North Eastern states, where bank access is still limited.
- 215 clusters have been identified where over 3,000 people live but no bank branch exists.
- In Phase 1, branches will be opened in 51 clusters with population over 8,000—locations that are already assigned to specific banks.
- In Phase 2, the remaining 164 clusters will be covered.
This move is aimed at promoting financial inclusion in under-served regions.
Strong Performance by PSBs in Recent Years
Despite competition, PSBs have shown solid financial growth between FY 2022–23 and FY 2024–25. NET profit of public sector banks has increased to Rs.1.78 lakh crore.
- Total business increased from ₹203 lakh crore to ₹251 lakh crore
- Net NPAs (bad loans) dropped from 1.24% to 0.52%
- Net profit rose from ₹1.04 lakh crore to ₹1.78 lakh crore
- Dividend payouts increased from ₹20,964 crore to ₹34,990 crore
This performance shows that PSBs are financially healthy, but to stay competitive, they need to expand their branch presence—especially in high-growth areas.
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