Indonesian Banking Sector Sees Significant Branch Consolidation

Digital Transformation Drives Branch Closures

The Indonesian banking sector has witnessed a significant reduction in branch networks over the past year, with 632 closures recorded between June 2024 and June 2025. This consolidation trend is primarily driven by the ongoing digital transformation in banking and efforts to enhance operational efficiency. The Financial Services Authority (OJK) reported that the total number of bank branches decreased from 24,170 to 23,538 during this period.

Breakdown of Branch Closures by Bank Type

State-owned banks led the consolidation with 286 branch closures, representing a 2.31% year-on-year decline in their branch network. Regional development banks (BPD) saw their branch count decrease by 1.16% to 3,999 units, while private banks recorded a more significant reduction of 3.86% to 7,442 branches. In contrast, foreign bank branches remained stable at 19 units, showing no change since 2023.

Regional Impact of Branch Consolidation

The branch closures were not uniform across regions. Five provinces experienced the most significant reductions: Riau (-3.44%), North Sulawesi (-3.27%), West Kalimantan (-2.59%), West Sumatra (-2.38%), and Central Java (-2.20%). These regional variations highlight the differing impacts of digital banking adoption across the country.

Industry Perspective on Branch Consolidation

Dian Ediana Rae, OJK's Head of Banking Supervision, noted that the trend of branch closures is a business decision driven by individual banks' strategies. The increasing adoption of digital banking services has changed customer behavior, reducing the need for physical branches, especially for low-transaction services.

Operational Adjustments and Workforce Management

While branch closures raise concerns about potential job losses, OJK has emphasized that banks have been proactive in managing their workforce. Banks have implemented retraining programs and staff reallocations to mitigate the impact on employees. The regulatory body continues to monitor the situation to prevent large-scale layoffs and ensure compliance with labor regulations.