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Sub-branch opens up new horizon for banking services

ABS can operate bigger transactions than mobile banking, but like mobile banking, ABS has also some banking limitations, i.e. it can't fill up the vacuum of branch banking.
Md. Zillur Rahaman
Sub-branch opens up new horizon for banking services

The banking sector in Bangladesh is passing through a very fragile time and presently facing three major challenges- a big volume of non-performing loans, the implementation of single digit interest rate and the Covid-19-hit recession. The big budget deficit of the current fiscal year will also take a toll on the turmoil in the banking sector in addition to the above three big challenges.

Now only cost minimising is the ultimate target of the banks, but also each of the bank can minimise operating cost by emphasising mobile banking, agent banking and sub-branch banking services as well as Alternative Delivery Channels' products. Now the sub-branch has added a new dimension to the banking services and at the same time, it will definitely reduce the cost of banking operation.

Initially with the passage of time, the banking system became smarter with the invention of mobile banking in 2011. The conventional bank doesn’t exist everywhere, and mobile banking can't fill up the vacuum of big transactions. This is why, Agent Banking Service (ABS) has been introduced and it was much better than mobile banking services. For this, the BB issued an ABS guideline in 2013, the first bank started its full-fledged agent operations in 2016. ABS service is becoming more popular day by day to the clients in remote area in terms of less costing way after its inception. 

Needless to say that ABS service has also a limited scale banking and financial service for those living in remote areas across the country. ABS can operate bigger transactions than mobile banking, but like mobile banking, ABS has also some banking limitations, i.e. it can't fill up the vacuum of branch banking.

Lastly Bangladesh Bank (BB), country’s central bank, issued the circular vide BRPD circular 28 dated December 27, 2018 allowing the ‘banking booth’ of scheduled banks to act as a sub-branch for reaching the banking service to doorstep of the unbanked rural people and as part of business development centres. In the last year, the central bank issued the BRPD circular 28 dated December 3, 2019 saying that the change was made with a view to making the banking services more communicative and clear to the customers.

The concept of sub-branch is familiar in many countries but BB in early December 2019 has published a circular to convert the booth banking to sub-branch. A new value is added to our banking services through the installation of such banking operations and services over the country. The sub-branch is functioning as a new dimension to the banking sector of Bangladesh in minimum cost but the same service as a branch. For a sub-branch, a bank needs only 250 to 300 square meters (sqm) of space but a full-fledge branch needs minimum 2500 sqm space. So, it is possible to deliver banking services at a minimum cost through the sub-branch. The management cost is lowered by 90 percent in the sub-branch.

According to the sub-branch banking policy, at least two officers but not more than ten are appointed at a sub-branch, having not more than 1,000 square feet. Fees, charges and commission of banking services are comparatively less here if compared to ABS and mobile banking.

The word ‘booth’ confused many customers as they relate its functions with the function of ‘ATM booth’, hindering achievement of the targets behind the launch of such installations of the banks. Hence, the central bank had renamed the ‘banking booth’ as ‘sub-branch’ of the banks to eliminate any confusion.

Such sub-branches are supposed to operate within limited expenditure under the supervision of a nearby full-fledged branch of a bank. Under the central bank’s instructions, fees, charges and commissions of banking services are supposed to be lesser at such sub-branches compare to ABS and mobile banking. In addition, transactions at the sub-branches are carried out on a real time basis and customers receive instant SMS and printed slips against their transactions.

To set up such sub-branch, the banks are encouraged to get approval from the BB based on the approval of the respective bank’s board. The central bank, however, preserves the rights to close any such booth without prior notice.

Before setting up the sub-branch idea, the BB has made a policy regarding setting up of a sub-branch. During formulating the policy, BB observed that most of the banks were setting up their branches in major cities, including Dhaka and Chittagong. The banks are not interested to open a branch in rural areas. Although remote areas now have agent banking, all banking services cannot be provided through the system. So, the policy of setting up “sub-branch” was made considering some prevailing situation of cost effective way and market potential of the unbanked people.

According to the central bank data, as of December 31, 2019, twenty-eight banks have got permission from the BB to open sub-branch and of them 21 banks have already opened sub-branch services in rural and industrial areas. A total of 393 sub-branches are catering services to their clients across the country.

As of December 31, 2019, NRB Commercial Bank has the highest 147 sub-branches in operation in the country. Recently IBBL also crossed 100. Other banks those are rendering service through sub-branch are IFIC, Jamuna, SIBL, SBAC, NBL, UCBL, SEBL, One Bank, Dhaka Bank and Premier Bank.

Among the Bangladeshi commercial banks, Dutch-Bangla Bank has been rendering such operations since long over the country through their ATM booths but named ‘Fast Track’ and also IBBL in the name of 'Sebaghor' has recruited 3 to 5 staff in every ATM centre where they are opening account, taking deposits and issuing credit and debit cards. DBBL has as many as 949 Fast Tracks throughout the country.

The new banking system was aimed at bringing unbanked and underprivileged people under the banking network. Besides, sub-branch banking can address the bank’s liquidity crisis by generating liquidity at the roots level.

The sub-branch is nearer to the business place and spares a lot of hassles because of this proximity. Already many people are now doing their banking via sub-branches, which have opened up a new horizon of banking, taking the services to the doorsteps of people in a cost-effective way.

Most of the banks are not interested to open a branch in rural areas as it is costly and kills long time to run profit. Although remote areas now have mobile banking and agent banking, all banking services cannot be provided through the two systems. So, the policy of setting up the “sub-branch” is undoubtedly a good initiative and client friendly policy, and most of the banks are grabbing this cost minimising lucrative offers amid Covid-19 outbreak.

The writer is banker. E-mail:[email protected]

 

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Editor : M. Shamsur Rahman

Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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