Despite the increasing prevalence of digital banking, Axis Bank, a prominent private sector lender, is embarking on a significant expansion, planning to open over 500 new branches across India this year. This strategic move is primarily aimed at bolstering its presence in the burgeoning Micro, Small, and Medium Enterprises (MSME) sector and transforming branches into crucial advisory and relationship-building centers.
Focus on MSME Growth Opportunities
Axis Bank's decision stems from a deep analysis of market data, identifying areas with rapid economic growth and underserved business segments. Sanjeev Moghe, head of branch banking (south) at Axis Bank, highlighted that data on regional growth and competitor presence informs their branch placement strategy, ensuring optimal business generation from new locations.
The MSME segment, a significant contributor to India's GDP (over 30%), is experiencing a compounded annual growth rate of 24 percent, according to Prashanth TS, group head – mid-corporate and medium enterprises group at Axis. This robust growth presents immense opportunities for the bank.
“Most MSMEs are self-funded, where they tend to give their families savings accounts to us. So whatever banking happens, it happens to the ecosystem and the funds tend to remain with us,” Prashanth noted, emphasizing the potential for expanding relationships beyond initial lending.
The bank's loan book for small business banking, SME, and mid-corporates has grown substantially, from approximately Rs 94,041 crore in March 2021 to Rs 293,147 crore by March 2026. This segment's contribution to the overall loan book has also increased from 15 percent to 24 percent during the same period. Improved underwriting practices, aided by digitalization, have played a key role in this expansion.
Branches as Advisory Hubs
While many routine transactions have shifted to digital platforms, Axis Bank views its physical branches as evolving into vital advisory-led relationship hubs. As cities expand and industrial clusters develop, the bank intends to deepen its reach into these growing markets, providing personalized services that digital channels alone cannot fully replicate.
The MSME business now contributes the highest monetary value to the bank’s premium wealth management offering, Burgundy Private, underscoring the strategic importance of these client relationships.
Proactive Measures Amid Global Events
Regarding potential external stressors, Vijay Shetty, group head – commercial banking group at Axis Bank, stated that the bank has not observed any stress on its MSME portfolio due to the ongoing conflict in West Asia. While the bank did increase provisions last quarter, it was described as a contingent measure, not necessarily indicative of immediate impact, allowing for flexibility based on future developments.
This expansion, which surpasses the 400 branches opened annually in the preceding two fiscal years, demonstrates Axis Bank's commitment to a hybrid banking model that leverages both digital efficiency and the deep customer engagement offered by physical presence, particularly in high-growth segments like MSMEs.