Notifications

(380 kb)
Master Circular on Branch Licensing

RBI/2015-16/10
DBR.CO.RRB.BL.BC.No.17/31.01.002/2015-16

July 1, 2015

The Chairman
All Regional Rural Banks

Dear Sir / Madam,

Master Circular on Branch Licensing

Please refer to the Master Circular RPCD.CO.RRB.No.BL.BC.4/03.05.90/2014-15 dated July 1, 2014 consolidating instructions / guidelines issued to Regional Rural Banks (RRBs) on Branch Licensing till June 30, 2014. The Master Circular has been suitably updated by incorporating the instructions issued up to June 30, 2015.

Yours faithfully,

(Sudha Damodar)
Chief General Manager

Encl: As above


Para No Particulars
I Introduction
II Branch Licensing Policy
1 Opening of Branches
2 Shifting of Branches
3 Conversion of Branches
4 Merger of Branches
5 Extension Counters
6 Upgradation of Extension Counters
7 Satellite Offices
8 Mobile Offices
9 Automated Teller Machines
10 Service Branch / Central Processing Centres / Back Offices
11 Regional Offices
12 Business Facilitator / Correspondent Model
III Classification / Re-classification of Centres
IV Submission of Returns
  Annex I - Form VI - Form of application for permission to open a new place of business
  Annex II - Particulars to be furnished by a bank in respect of its request for an Extension Counter
  Annex III - Statement of New Branch / Office / NAIO as and when opened – Proformae I and II
  Annex IV - Details of Tier-wise classification of Centers based on population
  Annex V - Quarterly Report Format - Branches opened in Tier 2- 6 centres
  Appendix - List of Circulars consolidated in the Master Circular

I. Introduction

The opening of new branches and shifting of existing branches of banks is governed by the provisions of Section 23 of the Banking Regulation Act, 1949. In terms of these provisions, banks cannot, without the prior approval of the Reserve Bank of India (RBI), open a new place of business in India or abroad or change, otherwise than within the same city, town or village, the location of the existing place of business. Section 23 (2) of the Banking Regulation Act lays down that before granting any permission under this section, the Reserve Bank may require to be satisfied, by an inspection under Section 35 or otherwise, as to the financial condition and history of the banking company, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location of the existing place of business. RRBs should approach the concerned Regional Offices of RBI in this regard.

II. Branch Licensing Policy

(i) The branch licensing policy covers the opening of branches in all Tiers (Tier 1 to 6) of the country. The Tier wise classification of centres based on population is given in Annex IV. Tier 1 comprises metropolitan and urban centres; Tiers 2, 3, and 4 comprise semi urban centres and Tiers 5 and 6 comprise rural centres.

(ii) The Boards of Directors of RRBs are required to decide on the policy and strategy for setting up new branches / offices etc., taking into account the yearly business plan, potential for business and profitability of the proposed branches, efficacy of the internal control system, redeployment of staff where surplus manpower has been identified, extension of prompt and cost-effective customer service to the clientele etc.

(iii) RRBs should obtain prior approval of their Boards of Directors before applying for opening / merger / shifting / conversion of branches / offices etc. No separate approval of the sponsor bank is required. Further, approval of the sub-group of District Consultative Committee (DCC) will also not be required for opening of branches. However, in case of shifting / merger / conversion of branches, approval of the sub-group of DCC will be required.

(iv) RRBs are required to obtain prior approval of RBI for opening new branches in Tier 1 centres. The applications will be considered on a very selective basis on merits of each case. In addition to the conditions laid down in paragraph II (1)(a), the overall financial position of the RRB, quality of its management, efficacy of the internal control system, CBS compliance and other relevant factors will be considered by RBI.

(v) RRBs are permitted to open branches in Tier 2 to Tier 6 centers (with population of up to 99,999 as per Census 2001) without having the need to take prior permission from Reserve Bank of India in each case, subject to reporting, provided they fulfill the conditions laid down in paragraph II (1)(b)(i). RRBs which do not satisfy the said conditions should obtain prior approval from the Regional Office of RBI.

(vi) RRBs which require prior approval of RBI for opening branches should submit their applications to the concerned Regional Office of the Reserve Bank, through the respective Regional Office of NABARD in the prescribed application Form VI (Rule 12) of Banking Companies Rules, 1949 (Annex I), which will give its comments on the merits of the application. The RRBs should forward an advance copy of the application to the concerned Regional Office of the Reserve Bank.

(vii) In order to expedite the process of disposal of applications, powers have been delegated to the Regional Offices of the Reserve Bank to take a decision on the applications of RRBs for opening / shifting / merger/ conversion of branches without reference to the concerned Empowered Committees (ECs). If required, the Regional Offices of the Reserve Bank may consult the concerned State Government.

(viii) There is a need to step up the opening of branches in unbanked rural centres in order to meet the objectives of increasing banking penetration and financial inclusion rapidly. It is also vitally important to meet the targets set out for providing banking services in all villages by opening more of brick and mortar branches in unbanked rural centres, besides the use of Business Correspondents.

(ix) RRBs should allocate at least 25 percent of the total number of branches proposed to be opened during a year in unbanked rural (Tier 5 and Tier 6) centres. An unbanked rural centre would mean a rural (Tier 5 and Tier 6) centre that does not have a brick and mortar structure of any scheduled commercial bank for customer based banking transactions.

(x) In order to take financial inclusion to the next stage of providing universal coverage and facilitating Electronic Benefit Transfer (EBT), RRBs were advised to draw up Financial Inclusion Plans (FIPs) for the period 2013-16.

(xi) RRBs should consider front-loading (prioritising) the opening of branches in unbanked rural centres over a 3 year cycle co-terminus with their FIP (2013-16) to facilitate speedier branch expansion in unbanked rural centres for ensuring a seamless roll out of the Direct Benefit Transfer (DBT) / EBT Scheme of the Government of India. The requirement of allocating at least 25 per cent of total number of branches proposed to be opened during a year in unbanked rural (Tier 5 and Tier 6) centres will continue. Credit will be given for branches opened in unbanked rural centres in excess of 25 per cent in a year which will be carried forward to the subsequent year of the FIP.

(xii) Authorisations for opening of branches / office etc. are issued to RRBs, by the concerned Regional Offices of RBI in cases where prior approval of RBI is required for opening branches / offices etc. The validity of the authorisation is for a maximum period of two years. RRBs are required to put in place the infrastructure for the branch / offices etc. and obtain a licence prior to the opening of the branch, office etc. from the concerned Regional Office of RBI within the validity of the authorization.

(xiii) In cases of change in name of the locality or street / road where the branch is located, since there is no change in location of the branch, RRBs need not seek approval or approach RBI for amendment to licence. The concerned Regional Office of RBI and DSIM, Mumbai may only be intimated of the change. Changes may also take place due to change in name of taluk / district or reorganisation of districts or formation of new States. Under such circumstances, too, RRBs need not forward the relevant licence/s to the Regional Office for amendment and may adopt the changed name on the basis of Government Notification, under advice to the concerned Regional Office of RBI and DSIM, Mumbai.

(xiv) In case an alteration in any name is to be made for avoiding confusion between branches of various banks bearing the same name in the same locality or on account of other justifiable circumstances, such requests should be addressed to the concerned Regional Office of RBI and while forwarding such requests, the relative licences, together with the covering letters, should also be sent.

1. Opening of Branches

(a) RRBs are required to obtain prior approval of RBI for opening branches in Tier 1 centres. Their applications will be considered, provided they fulfill the following conditions:

  • No default in maintenance of SLR and CRR during the last two years;

  • Operating profits are being made;

  • Net worth shows improvement; and

  • Net NPA ratio does not exceed 8 per cent.

(b) (i) RRBs are permitted to open branches in Tier 2 to Tier 6 centers (with population of up to 99,999 as per Census 2001) without having the need to take permission from Reserve Bank of India in each case, subject to reporting, provided they fulfill the following conditions as per the latest inspection report :

  • CRAR of at least 9%;

  • Net NPA ratio less than 5%;

  • No default in maintenance of CRR / SLR for the last year; and

  • Net profit in the last financial year;

  • CBS compliant

(ii) RRBs eligible to open branches in Tier 2 to Tier 6 centres, under general permission, may approach the Regional Office of RBI for post-facto automatic issue of the licence/s. The licence should be displayed in the premises of the branch so opened for information of its customers / public to instill confidence in them that the bank branch is authorized to conduct banking business.

(iii) RRBs which are not eligible are required to apply to RBI for prior permission to open branches in Tier 2 to 6 centres. Their applications will be considered provided they fulfill the conditions laid down in paragraph II (1)(a).

2. Shifting of Branches

At Rural Centres

(a) The shifting of branches in rural centres may be effected by RRBs themselves without obtaining the prior approval of RBI, subject to the condition that both the existing and proposed centres are within the same block, and that the relocated branch would be able to cater adequately to the banking needs of the villages served by the existing branch.

At Urban / Metropolitan Centres / Semi Urban Centres

(b)(i) RRBs may shift their branches at semi urban centres / urban / metropolitan centres within the same locality / municipal ward without the prior approval of RBI. It should, however, be ensured that the locality / ward is not rendered unbanked due to the shifting of branch/es.

(ii) RRBs have to obtain prior approval of the concerned Regional Office of RBI for shifting of branches outside the locality / municipal ward at semi urban / urban / metropolitan centres.

(c) RRBs may shift their branches as indicated above, but ensure that the licence of the branch is submitted to the concerned Regional Office of RBI for getting the new address incorporated therein at the earliest but not later than three months from the date of the shifting of the branch.

(d) RRBs should, however, ensure that customers of the branch, which is being shifted, are informed well in time before actual shifting of the branch, so as to avoid inconvenience to them.

3. Conversion of Branches

(a) RRBs may themselves decide the need for conversion of the existing loss making branches into satellite / mobile offices keeping in view the cost-benefit aspect, the likely inconvenience that may be caused to the existing clientele, the effect of the conversion on the performance in the preparation of district credit plan and priority sector lending. With a view to providing better customer service in rural areas, RRBs may also convert their satellite offices into full-fledged branches after obtaining concurrence from the Empowered Committee (EC) and RRBs should also obtain necessary licence from the concerned Regional Office of RBI.

(b) Conversion of branches into satellite offices at centres other than rural is not permissible.

4. Merger of Branches

Where two loss making branches of any RRB are in close proximity to each other (i.e. within a distance of about 5 kms.), the RRB may consider merging the two branches with a view to rationalising the spatial spread and reducing establishment / operating costs.

5. Extension Counters

(a) RRBs, with the approval of their Boards of Directors, can open extension counters at the premises of the institutions of which they are principal bankers after obtaining a licence from the concerned Regional Office of RBI for the purpose. An extension counter can be opened within the premises of big offices, factories, hospitals, military units, educational institutions, residential colonies, shopping complexes where there is a large complement of staff / workers, students, who because of their identical working hours and non-availability of banking facilities at a reasonable distance find it difficult to carry out their banking transactions. Apart from above, RRBs can also set up extension counters after obtaining licence from the concerned Regional Office of RBI at places of worship and market places. The condition of being principal bankers, however, would not apply in such cases.

(b) The extension counter should carry out limited type of banking business, such as :

  • deposit / withdrawal transactions
  • issue and encashment of drafts and mail transfers
  • issue and encashment of travellers cheques
  • sale of gift cheques
  • collection of bills
  • advances against fixed deposits of their customers (within the sanctioning power of the concerned officials at the extension counter)
  • facility of safe deposit locker (provided adequate security arrangements are made).

Further, if the extension counter proposes to undertake State government business, it would require prior approval from the concerned Government authority as also of Department of Government and Bank Accounts (DGBA), RBI, CO.

(c) RRBs should submit their request for opening extension counters and furnish particulars of the proposed Extension Counter in Parts I and II of the format, given in Annex II, to the concerned Regional Offices of RBI.

6. Upgradation of Extension Counters

(a) RRBs should approach the concerned Regional Office of RBI for prior approval for upgrading an extension counter into a full-fledged branch. The proposal is considered if the following conditions are fulfilled:

(i) The extension counter has been functioning for a minimum period of five years;

(ii) The number of deposit accounts exceeded 2000 during the last one-year; and

(iii) The average deposits (i.e. on a monthly basis) for the last three years are not less than Rs.2 crore.

(b) The proposals, wherein the above conditions are not fulfilled entirely but otherwise the concerned extension counters have grown so as to be fit for conversion into branches, are considered on merit.

7. Satellite Offices

The guidelines, as under, should be followed by the RRBs in respect of satellite offices:

(a) The satellite office should be established at fixed premises in the surrounding villages. It should be controlled and operated from a base branch located at central village / block headquarters;

(b) Each satellite office should function on a few specified days (at least twice) in a week at specified hours;

(c) All types of banking transactions may be conducted at the satellite office;

(d) The customers of the satellite office should be permitted to transact business at the base branch on non-operating days of such office;

(e) While separate ledgers / registers / scrolls may be maintained for each satellite office, all the transactions carried out thereat should be incorporated in the books of account of the base branch;

(f) The staff attached to the base branch, preferably consisting of a member of supervisory staff, a cashier-cum-clerk and an armed guard, should be deputed to the satellite office; and

(g) Adequate arrangements for insurance of furniture, cash-in-transit, etc. should be made.

8. Mobile Offices

The scheme of mobile offices envisages the extension of banking facilities through a well-protected van with arrangements for two or three officials of the bank sitting in it with books, safe containing cash, etc. The mobile unit would visit the places proposed to be served by it on certain specified days / hours. The mobile offices would be attached to a branch of the RRB. The mobile office/s should not visit the rural places which are served by cooperative banks and places served by regular offices of commercial banks.

9. Automated Teller Machines

(a) RRBs need not obtain permission of RBI for installation of Automated Teller Machines (ATMs) at branches and extension counters for which they hold licences issued by RBI. RRBs should, however, report to DSIM as and when an ATM is installed at a branch or an extension counter.

(b) In case any RRB wishes to set up an off-site ATM in its area of operation, it may do so after assessing the cost and benefit. Prior approval of RBI need not be obtained, but on opening of such ATMs RRBs should immediately inform the respective Regional Office of the Reserve Bank for the purpose of getting a formal authorisation for the place of business.

10. Service Branch / Central Processing Centres / Back Offices

RRBs are allowed to set up Service Branches / Central Processing Centres (CPCs) / Back Offices exclusively to attend to back office functions such as data processing, verification and processing of documents, issuance of cheque books, demand drafts etc. and other functions incidental to their banking business. These offices should have no interface with customers and would not be allowed to be converted into General Banking branches. These offices would be treated on par with a branch and RRBs shall be required to obtain necessary licence from the concerned Regional Office of RBI.

11. Regional Offices

a) RRBs will be allowed to open one Regional Office (RO) for every 50 branches. RRBs having up to 50 branches will be under the direct control of the Head Office, without any intermediate tier. The cases of RRBs, which require relaxation in the above norm in regard to the number of branches to be covered by one RO due to geographical / other conditions, will be examined by the Empowered Committee (EC) and referred to Central Office, Department of Banking Regulation (DBR) for consideration.

b) The ROs are not permitted to transact any banking business. However, RRBs are required to obtain licences from the concerned Regional Office of RBI prior to functioning / opening of these offices. RRBs can either shift or close / merge these offices at their discretion without prior approval of RBI, but they are required to ensure that the licence is submitted to the concerned Regional Office of RBI for getting the new address incorporated in the licence at the earliest, but not later than three months from the date of shifting. As regards closure / merger of such offices, the licence has to be surrendered to the concerned Regional Office of RBI for cancellation immediately after the closure / merger of the office under advice to the DSIM of RBI.

12. Business Facilitator / Business Correspondent Model

With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector, RRBs have been permitted to use the services of intermediaries in providing financial and banking services through the use of Business Facilitator / Business Correspondent Model as per the guidelines issued in this regard.

(I) Guidelines for Engaging Business Facilitator

Under the Business Facilitator Model, banks may use the services of intermediaries such as:

(a) Non-Governmental Organisations (NGOs)/Self Help Groups (SHGs)

(b) Farmers Clubs

(c) Cooperatives

(d) Community based organizations

(e) IT enabled rural outlets of corporate entities

(f) Post Offices

(g) Insurance agents

(h) Well functioning Panchayats

(i) Village Knowledge Centres

(j) Agri Clinics

(k) Agri Business Centres

(l) Krishi Vigyan Kendras

(m) Khadi and Village Industries Commission (KVIC) / Khadi and Village Industries Board (KVIB) units

Depending on the comfort level of the bank for providing facilitation services, such services may include (i) identification of borrowers and fitment of activities; (ii) collection and preliminary processing of loan applications including verification of primary information/data; (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling; (iv) processing and submission of applications to banks; (v) promotion and nurturing SHGs/Joint Liability Groups (JLGs); (vi) post-sanction monitoring; (vii) monitoring and handholding of SHGs/JLGs/Credit Groups/others; and (viii) follow-up for recovery.

(II) Guidelines for engaging Business Correspondents

RRBs may engage Business Correspondents (BCs), subject to compliance with the following guidelines. They may formulate a policy for engaging BCs with the approval of their Board of Directors. RRBs should take measures to address possible reputational risks arising out of appointment and functioning of BCs. Due diligence may be carried out on the individuals / entities to be engaged as BCs prior to their engagement. The due diligence exercise may, inter alia, cover aspects such as reputation/market standing, financial soundness, management and corporate governance, cash handling ability and ability to implement technology solutions in rendering financial services. Every BC should be attached to and under the oversight of a base branch.

A. Eligible individuals/entities

RRBs may engage the following individuals/entities as BCs:

(a) Individuals like retired bank employees, retired teachers, retired government employees and ex-servicemen, individual owners of ‘kirana’/medical/Fair Price shops, individual Public Call Office (PCO) operators, agents of Small Savings schemes of Government of India/Insurance Companies, individuals who own petrol pumps, authorized functionaries of well-run Self Help Groups (SHGs) which are linked to banks, any other individual including those operating Common Service Centres (CSCs);

(b) NGOs/MFIs set up under Societies/Trust Acts and Section 25 Companies;

(c) Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/Cooperative Societies Acts of States/Multi State Cooperative Societies Act;

(d) Post Offices;

(e) Companies registered under the Indian Companies Act, 1956 with large and widespread retail outlets, other than Non- Banking Financial Companies (NBFCs); and

(f) Non Deposit taking NBFCs (NBFCs-ND).

NBFCs-ND may be engaged as BCs, subject to the following conditions:

(i) It should be ensured that there is no comingling of bank funds and those of the NBFC-ND appointed as BC;

(ii) There should be a specific contractual arrangement between the bank and the NBFC-ND to ensure that all possible conflicts of interest are adequately taken care of;

(iii) RRBs should ensure that the NBFC-ND does not adopt any restrictive practice such as offering savings or remittance functions only to its own customers and forced bundling of services offered by the NBFC-ND and the bank does not take place; and

(iv) RRBs should be guided by our circular RPCD.No.RRB.BC.25/03.05.34/98-99 dated September 15, 1998 on Financial Assistance to NBFCs – Surplus Non-SLR Funds.

B. Business Correspondent Model

While a BC can be a BC for more than one bank, at the point of customer interface, a retail outlet or a sub-agent of a BC shall represent the bank which has appointed the BC. Interoperability is permitted at the retail outlets or sub-agents of BCs (i.e. at the point of customer interface), provided the technology available with the bank, which has appointed the BC, supports interoperability, subject to the following conditions:

(i) The transactions and authentications at such retail outlets or sub-agents of BCs are carried out on-line;

(ii) The transactions are carried out on Core Banking Solution (CBS) platform; and

(iii) The banks follow the standard operating procedures to be advised by the Indian Banks' Association (IBA).

C. Procedure for engaging BCs

The terms and conditions governing the contract between the bank and the BC should be carefully defined in written agreements and subjected to a thorough legal vetting. While drawing up agreements, RRBs should strictly adhere to instructions contained in the guidelines on managing risks and code of conduct in outsourcing of financial services by banks, issued by Reserve Bank of India on November 3, 2006. RRBs will be fully responsible for the actions of the BCs and their retail outlets/sub agents.

D. Scope of activities

The activities to be undertaken by the BCs would be within the normal course of banking business. The scope of activities of a BC may include (i) identification of borrowers; (ii) collection and preliminary processing of loan applications including verification of primary information/data; (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling; (iv) processing and submission of applications to banks; (v) promoting, nurturing and monitoring of SHGs/JLGs/Credit Groups/others; (vi) post-sanction monitoring; (vii) follow-up for recovery, (viii) disbursal of small value credit; (ix) recovery of principal/collection of interest; (x) collection of small value deposits; (xi) sale of micro insurance/ mutual fund products/ pension products/ other third party products (xii) receipt and delivery of small value remittances/ other payment instruments and (xiii) distribution of banknotes and coins.

E. KYC Norms

KYC and AML procedures, as laid down in the Master Circular on KYC and AML and subsequent circulars on the subject should be followed in all cases. The banks may, if necessary, use the services of the BC for preliminary work relating to account opening formalities. However, ensuring compliance with KYC and AML norms under the BC model continues to be the responsibility of banks.

F. Customer confidentiality

The banks should ensure the preservation and protection of the security and confidentiality of customer information in the custody or possession of BC.

G. Information Technology Standards

The banks should ensure that equipment and technology used by the BC are of high standards.

H. Distance Criterion

With a view to ensuring adequate supervision over the operations and activities of the retail outlet/sub-agent of BCs by banks, every retail outlet/sub-agent of BC is required to be attached to and be under the oversight of a specific bank branch designated as the base branch. It was stipulated that the distance between the place of business of a retail outlet/sub-agent of BC and the base branch should ordinarily not exceed 30 kms in rural, semi-urban and urban areas and 5 kms in metropolitan centres. In case there was a need to relax the distance criterion, the District Consultative Committee (DCC)/State level Bankers Committee (SLBC) could consider and approve relaxation on merits in respect of under-banked areas, etc.

With a view to providing operational flexibility to banks and in view of the technological developments in the banking sector, the stipulation regarding distance criteria has been removed. RRBs should, however, while formulating the Board approved policy for engaging BCs, keep in mind their notified area of operations and the objectives of adequate oversight of the BCs as well as provision of services to customers while deciding how to modify extant distance criteria.

I. Ultra Small Branches

RRBs may establish outlets in rural centres, for furthering financial inclusion, from which BCs may operate. These BC outlets may be in the form of low cost simple brick and mortar structures. The base branch will have to provide oversight of the BC outlets which will include periodic visits by officers of the base branch to the outlets as well as to other places of functioning of BCs. It is also important that quality services are provided through the ICT based delivery model. Thus it will be necessary to have an intermediate brick and mortar structure (Ultra Small Branch) between the present base branch and BC locations so as to provide support to a cluster of BC units at a reasonable distance. The Ultra Small Branches could be satellite offices or regular branches and may be set up between the base branch and BC locations so as to provide support to about 8-10 BC units at a reasonable distance of 3-4 kilometers. They could be either set up newly or by conversion of the BC outlets. Ultra Small Branches should have minimum infrastructure such as a Core Banking Solution (CBS) terminal linked to a pass book printer and a safe for cash retention for operating large customer transactions and be managed full time by bank officers/employees. It is expected that such an arrangement will lead to efficiency in cash management, documentation, redressal of customer grievances and close supervision of BC operations. BCs can operate from such Ultra Small Branches as their association with the branch will increase their legitimacy and credibility in the area and give people increased confidence to use their services. However, banks should ensure that such an arrangement does not result in BCs limiting operations to serving customers at such branches only, if, due to geographical spread, such arrangements may lead to BC services not being easily available in the entire area of their operations.

J. Payment of Commission / Fee

RRBs may pay reasonable commission/fee to the BC, the rate and quantum of which may be reviewed periodically. The agreement with the BC should specifically prohibit them from charging any fee to the customers directly for services rendered by them on behalf of the bank. The commission structure or incentive mechanism should be devised in a manner that mere increase in the number of clients served or the transaction volume does not drive the commission. The remuneration should combine fixed and variable parts dependent, inter-alia, on some indication or measure of customer satisfaction. Some part of the variable remuneration could be deferred or clawed back in case of deficiency of service.

RRBs (and not BCs) are permitted to collect reasonable service charges from the customers in a transparent manner.

K. Transactions put through BC

As engagement of intermediaries such as Business Facilitators/Correspondents involves significant reputational, legal and operational risks, due consideration should be given by RRBs to these risks. RRBs should adopt technology-based solutions for managing the risk, besides increasing the outreach in a cost effective manner. The transactions should normally be put through ICT devices (handheld device/mobile phone) that are seamlessly integrated to the Core Banking Solution (CBS) of the bank. The transactions should be accounted for on a real time basis and the customers should receive immediate verification of their transactions through visuals (screen based) or other means (debit or credit slip).

In formulating their schemes on BCs, RRBs may, inter alia, be guided by the recommendations made in Chapter III of the Khan Group Report as also the outsourcing guidelines released by Reserve Bank of India on November 3, 2006 (available on RBI website: www.rbi.org.in). The arrangements with the BC shall specify:

(i) Suitable limits on cash holding by intermediaries as also limits on individual customer payments and receipts;

(ii) Issuing a receipt on behalf of the bank as acknowledgment for cash collected from the customer;

(iii) Accounting for all off-line transactions are accounted for and reflecting them in the books of the bank by the end of the day; and

(iv) The responsibility of the bank to the customer for acts of omission and commission of the BC in all agreements/ contracts with the customer.

L. Internal Control & Monitoring

RRBs should carry out a detailed review of the performance of various BCs engaged by them at least once in a year and they should monitor the activities of BCs through their Controlling Offices and also through various fora under Lead Bank Scheme i.e. (SLBC, DCC, DLRC). The internal control mechanism in the bank should include visits to BCs and interface with customers at periodical intervals.

M. Consumer Protection Measures

RRBs should take all measures to protect the interests of the customers. Some such safeguards are outlined below:

(i) The retail outlet/sub-agent of the BC should be personally introduced to the members of public by the officials of the bank in the presence of village elders and government functionaries in a public meeting so that there is no misrepresentation/impersonation.

(ii) The products and processes should be approved by the banks and the BC should not introduce any product/process without the approval of the bank concerned.

(iii) Each retail outlet/sub-agent may be required to post a sign in the local language (vernacular) indicating their status as service providers for the bank as also disclose the name of the BC, the telephone numbers of the base branch/controlling office of the bank and the Banking Ombudsman and the fees for all services available at the outlet.

(iv) Financial services offered by the retail outlets/sub-agents of the BC should not be tied to the sale of any product of such company.

(v) The charges for offering various services should be indicated in a brochure and made available at the retail outlets/with the sub-agents.

(vi) RRBs should develop suitable training modules in the local language(s) in order to provide proper attitudinal orientation and skills to the BCs/sub-agents.

(vii) As a measure of social audit, there could be periodic block level meetings where members of public are invited along with the BCs operating in the area as also the linked branch managers to express their difficulties and to obtain feedback. Lead District Manager (LDM) of the lead bank could attend such meetings in the district to get a direct feedback and provide such feedback to the controlling offices.

(viii) The bank should have necessary Business Continuity Plan (BCP) in place to ensure uninterrupted service in case the agency arrangement with the BCs/sub-agents is terminated.

(ix) In case a company is engaged as a BC by more than one bank, it should be ensured that the customer database and account details are kept separate and there is no co-mingling of data.

N. Redressal of Grievances

A Grievance Redressal Machinery should be constituted within RRBs for redressing complaints about services rendered by the BCs and wide publicity given about it through electronic and print media. The name and contact number of the designated Grievance Redressal Officer of the bank should also be made known and widely publicized. The designated officer should ensure that genuine grievances of customers are redressed promptly. The grievance redressal procedure of the bank and the time frame fixed for responding to the complaints should be placed on the bank's website. If a complainant does not get satisfactory response from the bank within 60 days from the date of his lodging the compliant, he will have the option to approach the Office of the Banking Ombudsman concerned for redressal of his grievance/s.

O. Customer Education

Financial literacy and customer education should form an important part of the business strategy and commitment by RRBs adopting the BC model. RRBs may scale up efforts substantially towards educating their clientele in their respective vernacular languages regarding the benefits of banking habit. Information regarding BCs engaged by banks may be placed on the respective RRBs' websites. The Annual Report of the RRBs should also include the progress in respect of extending banking services through the BC model and the initiatives taken by them in this regard. RRBs may also use the print and electronic media (including in the vernacular language) to give wide publicity about implementation of the BC model by them.

III. Classification / Re-classification of Centres

RRBs should ascertain the population group classification of the centres of which they are not sure, from RBI, DSIM, Banking Statistics Division, C-8/9, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051 before approaching RBI for opening of new branches. Any query with regard to reclassification of centres also may be referred to DSIM by the Head Office of the RRB along with relevant documents such as Gazette Notifications, etc. in support of the change.

IV. Submission of Returns

(i) Immediately on opening of a place of business, all RRBs are required to inform the date of opening and the postal address of the office / branch etc. to the concerned Regional Office of RBI.

(ii) In terms of Rule 13 of the Banking Regulations (Companies) Rules, 1949, the RRB is required to submit a list relating to its offices in India in Form VII within a period of one month from the close of every quarter to the office of RBI situated in the state in which its Head Office is located.

(iii) Further, RRBs should submit returns in the proformae given in Annex III, as advised in Circular RPCD.CO.RRB.BL.BC.10/03.05.90A/2005-06 (RBI/2005-06/46) dated July 6, 2005, relating to the new offices / branches opened and change in status due to merger, etc. of existing offices / branches effected during the quarter to DSIM (Banking Statistics Division) and the concerned Regional Office of RBI within 14 days of the month succeeding the quarter to which they relate. While submitting the current quarter Returns, the previous quarter's reference must be quoted in the forwarding letter. 'Nil' Returns must be sent to DSIM and the concerned Regional Office of RBI in case there is nothing to report on opening / closing / change in status, etc., of any office / branch / NAIO (Not Administratively Independent Offices like Extension Counters, Satellite Offices, ATMs, etc.) during a quarter.

(iv) The details of the branches opened in Tier 2 to 6 centres, under general permission, should be reported in the prescribed format (Annex V), to the concerned Regional Office of RBI. The information should also be furnished to DSIM in the proformae given in Annex III.


Annex IV

Details of Tier-wise Classification of Centers Based on Population

(i) Classification of centers (tier-wise) Population (as per 2001 census)
Tier 1 1,00,000 and above
Tier 2 50,000 to 99,999
Tier 3 20,000 to 49,999
Tier 4 10,000 to 19,999
Tier 5 5,000 to 9,999
Tier 6 Less than 5000
(ii) Population-group wise classification of centers
Rural center Population upto 9,999
Semi-urban Center From 10,000 to 99,999
Urban Center From 1,00,000 to 9,99,999
Metropolitan Center 10,00,000 and above

Annex V

Name of the Regional Rural Bank :

Report of branches opened in Tier 2-6 Centres without prior approval of RBI consequent to relaxations - Status as at the end of quarter

Sl. No Name of the Sponsor Bank Details of branch opened Name of the District Block Village Date of opening the branch Reference and Date of application for licence to RBI Date of issuance of licence by RBI
1 2 3 4 5 6
           
           
           
           

Appendix

List of Circulars consolidated by the Master Circular

No. Circular No. Date Subject
1 RBI/2014-15/635 DBR.No.BAPD.BC.102/22.01.001/2014-15 11.6.2015 Reporting requirement on On-site, Off-site and Mobile ATMs
2 RBI/2014-15/281 RPD.CO.RRB.BC.No.38/03.05.33/2014-15 29.10.2014 Financial Inclusion by Extension of Banking Services-Use of Business Correspondents
3 RBI/2013-14/570 RPCD.FID.BC.No.96/12.01.011/2013-14 22.04.2014 Scaling up of the Business Correspondent (BC) Model – Issues in Cash Management
4 RBI/2013-14/212 DBOD.No.BAPD.BC.46/22.01.009/2013-14 02.09.2013 Financial Inclusion by Extension of Banking Services – Use of Business Correspondents for Distribution of Banknotes and Coins – Alternative Avenues
5 RBI/2013-14/175 RPCD.CO.RRB.BC.No.18/03.05.33/2013-14 07.08.2013 Frontloading of Branches in Unbanked Rural Areas
6 RBI/2012-13/283
RPCD.CO.RRB.BC.No.43/03.05.90/2012-13
06.11.2012 Branch Licensing Policy – Opening of Branches in Unbanked Rural Centres
7 RBI/2012-13/281
RPCD.CO.RRB.BL.BC.No.42/03.05.90/2012-13
02.11.2012 Master Circular on Branch Licensing-Regional Rural Banks – Amendment
8 RBI/2011-12/158
RPCD.CO.RRB.BL.BC.No.19/03.05.90/2011-12
01.08.2012 Relaxation in Branch Licensing Policy – Tier 2 Centres
9 RBI/2011-12/157
RPCD.CO.RRB.BL.BC.No.18/03.05.90/2011-12
01.08.2012 Simplification of the Procedure for Branch Licensing
10 RBI/2012-13/84
RPCD.CO.RRB.BL.BC.No.05/03.05.090/2012-13
02.07.2012 Sec 23 of Banking Regulation Act 1949-Master Circular on Branch Licensing-Regional Rural Banks
11 RBI/2012-13/77
DBOD.No.BL.BC.26/22.01.001/2012-13
02.07.2012 Sec 23 of Banking Regulation Act 1949-Master Circular on Branch Authorisation
12 RBI/2011-12/566
DBOD.No.BL.BC.105/22.01.009/2011-12
17.05.2012 Financial Inclusion - Use of Business Correspondents
13 RBI/2011-12/425
DBOD.No.BL.BC.82/22.01.009/2011-12
02.03.2012 Financial Inclusion by Extension of Banking Services-Use of Business Correspondents(BCs)
14 RBI/2010-451
RPCD.CO.RRB.BC.No.56/03.05.90A/2010-11
29.03.2011 Section 23 of Banking Regulation Act, 1949- Relaxations in Branch Licensing Policy
15 RBI/2010-283
RPCD.CO.RRB.BC.No.28/03.05.90A/2010-11
18.11.2010 Section 23 of the Banking Regulation Act, 1949- Relaxations in Branch Licensing Policy
16 RBI/2010-11/217
DBOD.No.BL.BC.43/22.01.009/2010-11
28.09.2010 Financial Inclusion by Extension of Banking Services-Use of Business Correspondents(BCs)
17 RBI/2009-2010/306
RPCD.CO.RRB.No.BC.54/03.05.90A/2009-10
05.02.2010 Policy for opening of Regional Offices by RRBs
18 RBI/2008-09/504
RPCD.CO.RRB.BCNo.114/03.05.90-A/2008-09
18.06.2009 "Controlling Office" renamed as "Regional Office"- RRBs
19 RBI/2008-2009/468
RPCD.CO.RRB.BC.No.101/03.05.90-A/2008-09
04.05.2009 "Controlling Office" renamed as "Regional Office"- RRBs
20 RBI/2008-2009/285
RPCD.CO.RRB.BC.No.61/03.05.90-A/2008-09
17.11.2008 Mid-Term Review of annual policy for the year 2008-09 Branch Licensing - Regional Rural Banks- Further Liberalization-Conditions for opening of new branches.
21 RPCD.CO.RRB.No.BC.28/03.05.90A/2007-08 09.10.2007 Opening of Controlling Offices by amalgamated RRBs
22 RPCD.CO.RRB.No.BC.25/03.05.90-A/2007-08 21.09.2007 Opening, shifting, merger and conversion of branches of RRBs - Dispensing with Service Area Obligations
23 RPCD.CO.RRB.No.BC.24/03.05.90-A/2007-08 13.09.2007 Conversion of Satellite Offices into full-fledged branch - RRBs
24 RPCD.CO.RRB.No.BC.22/03.05.90-A/2007-08 04.09.2007 Opening of Extension Counters by RRBs
25 RPCD.CO.RRB.No.BL.BC.09/03.05.90-A/2007-08 02.07.2007 Section 23 of Banking Regulation Act 1949 - Master Circular on Branch Licensing - RRBs
26 RPCD.CO.RRB.No.BC.105/03.05.90-A/2006-07 22.06.2007 Section 23 of Banking Regulation Act 1949 -Master Circular on Branch Licensing - RRBs
27 RPCD.CO.RRB.No.BC.102/03.0590-A/2006-07 15.06.2007 Section 23 of the Banking Regulation Act, 1949 - Master Circular on Branch Licensing - RRBs
28 RPCD.CO.RRB.BL.BC.90/03.05.90-A/2005-06 13.06.2006 Annual Policy Statement for the year 2006-07-Liberalisation and simplification of branch licensing policy for RRBs.
29 RPCD.CO.No.RRB.BC.57/03.05.33(F)/2005-06 27.12.2005 Special package for RRBs.
30 RPCD.CO.RRB.BL.BC.10/03.05.90A/2005-06 06.07.2005 Branch Banking Statistics- Submission of Quarterly Returns-Revision of Proforma -I & II.
31 DBOD.No.BL.BC.23/22.01.001/2000-01 12.09.2000 Opening of branches / extension counters / shifting etc. Obtention of prior licence.
32 DBOD.BC.No.127/12.05.005/99-2000 30.11.1999 Rationalisation of Returns submitted by banks to RBI.
33 DBOD.No.BL.BC.74/22.01.001/98 29.07.1998 Shifting of Rural branches outside the Block / Service Area.
34 DBOD.No.BL.BC.115/22.06.001/97 21.10.1997 Branch Banking Statistics - Submission of Monthly Returns - Revision of Proforma II & III.
35 RPCD.RRB.No.BC.111/03.05.65/96-97 22.03.1997 Opening of branches by RRBs.
36 DBOD.No.BC.64/22.01.001/95 05.06.1995 Relocation of loss-making branches and rationalisation of branch network of RRBs.

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