Within days of new RBI Governor Raghuram Rajan making comments to this effect, the central bank today allowed lenders to open branches.

By PTI | 19 Sep, 2013, 08.54PM IST | Economic Times

MUMBAI: Within days of new RBI Governor Raghuram Rajan making comments to this effect, the central bank today allowed lenders to open branches, including in big cities, without its permission provided they fulfil certain conditions.

With the objective of further liberalising and rationalising the branch authorisation policy, the general permission to domestic scheduled commercial banks (other than RRBs) is now allowed to open branches in Tier 1 centres, the Reserve Bank said in a notification.

However, the automatic permission is subject to certain conditions including at least 25 per cent of the total number of branches opened during the financial year must be opened in unbanked rural (Tier 5 and Tier 6) centres, it said.

Unbanked centres refer to locations that do not have a brick and mortar structure of any scheduled commercial bank for customer based banking transactions.

“No longer will a well-run scheduled domestic commercial bank have to approach the RBI for permission to open a branch,” Rajan had said in his maiden press conference after taking charge as the Governor.

At the same time, RBI said, total number of branches opened in Tier I cities cannot exceed total number of branches opened in Tier 2 to 6 centres and all centres in the North Eastern States and Sikkim.

“Banks have to ensure that all branches opened during a financial year are in compliance with the norms as stipulated. In case a bank is unable to open all the branches it is eligible for in Tier 1 centres, it may carry-over these branches during subsequent two years,” it said.

Banks, which for some reason are unable to meet their obligations of opening branches in Tier 2 to 6 centres in aggregate, or in unbanked rural centres during the financial year, must necessarily rectify the shortfall in the next financial year, it said.

RBI would have the option to withhold the general permission now being granted to banks which fail to meet the above mentioned criteria along with imposing penal measures on banks which fail to meet the obligations, it added.

Detailed guidelines in this regard including reporting requirements and examples illustrating the above stipulations are being issued shortly, it said.

Source: http://goo.gl/zHNx1H