High productivity in performing this function requires banks to have operational and allocational efficiency. Operational efficiency entails performing the intermediation function at the lowest cost. Allocational efficiency requires that resources are allotted to the most deserving and productive segments of the population.
Banks must rationalize their distribution networks, by making more efficient use of information and communication technologies. The number of bank branches rose in the last decade, despite the sharp increase in the share of telephone and on-line banking services.