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Date: 01/07/2010
Section 23 of Banking Regulation Act, 1949 – Master Circular on Branch Authorisation

RBI/2010-11/58
DBOD.No. BL.BC. 8 /22.01.001/2010-11

July 1, 2010
Ashadha 10, 1932(Saka)

All Commercial Banks
(excluding RRBs)

Dear Sir,

Section 23 of Banking Regulation Act, 1949 – Master Circular on Branch Authorisation

Please refer to the Master Circular DBOD.No. BL.BC.20/22.01.001/2009-10 dated July 1, 2009 consolidating instructions/ guidelines issued to banks on Branch Authorisation till June 30, 2009. The Master Circular has been suitably updated by incorporating the instructions issued upto June 30, 2010. A copy of the updated Master Circular is enclosed. The Master Circular has also been placed on the RBI website (http://www.rbi.org.in).

2. Foreign banks may be guided by paragraph 20 of this Master Circular.

Yours faithfully,

( A.K. Khound)
Chief General Manager

Encls. : as above


TABLE OF CONTENTS

Paragraph No

Particulars

A.

PURPOSE

B.

CLASSIFICATION

C.

PREVIOUS GUIDELINES CONSOLIDATED

D.

SCOPE OF APPLICATION

1.

INTRODUCTION

2.

DEFINITION

3.

BRANCH AUTHORISATION POLICY

4.

PROCEDURE FOR APPLICATION

5.

VALIDITY OF AUTHORISATIONS

6.

OPENING OF BRANCHES

7.

SETTING UP OF OFF SITE ATMs – GENERAL PERMISSION

8.

SUBSTITUTION OF CENTRES

9.

SETTING UP OF CENTRAL PROCESSING CENTRES/BACK OFFICES

10.

CALL CENTRES

11.

BUSINESS FACILITATORS/ BUSINESS CORRESPONDENT MODEL

12.

DOORSTEP BANKING

13.

SHIFTING OF BRANCHES

13.1

General

13.2

Shifting within the centre (city/ town/village)

13.3

Rural branches

13.3.1

Within the block

13.3.2

Outside the block

13.4

Metropolitan, Urban and Semi Urban branches

13.5

Part Shifting of branches

14.

CONVERSION OF BRANCHES

14.1

Conversion of Specialised Branch

14.2

Conversion of general banking branches to any type of specialized branch

14.3

Upgradation of Extension Counters and Satellite Offices  into full-fledged branches

14.4

Conversion of Rural Branch into Satellite Office

15

MERGER OF BRANCHES

15.1

General

15.2

Merger of Sole Rural/ Semi Urban Branch

15.3

Merger of Metropolitan, Urban and Semi Urban Branches

16

CLOSURE OF BRANCHES

16.1

General

16.2

Closure of Rural branches

16.3

Metropolitan, Urban and Semi - Urban branches

17.

ACQUISITION OF PREMISES

18.

POPULATION GROUP WISE CLASSIFICATION OF CENTRES

19.

REPORTING TO RESERVE BANK OF INDIA

20.

FOREIGN BANKS

ANNEX – 1 - FORM VI Form of application for permission to open a new place of Business

ANNEX – 2 - Summary of branches proposed to be opened

ANNEX – 3 (A) - State-wise, population group-wise number of existing branches in underbanked / other than underbanked districts

ANNEX – 3 (B) - State-wise, population group-wise number of existing ATMs in underbanked / other than underbanked districts

ANNEX – 3 (C) - State-wise, population group-wise number of existing Extension counters

ANNEX – 3 (D) - Information to be submitted along with Annual Branch Expansion Plan

ANNEX – 4 - List of Underbanked districts

ANNEX – 5 - Details of Tier-wise classification of centres based on population

ANNEX – 6 - List of Underbanked districts in Underbanked States

ANNEX – 7 - Proposals for shifting of branches

ANNEX – 8 - Proposals for merger of branches

ANNEX – 9 - Proposals for closure of branches

ANNEX – 10 - Reporting format for opening of branches under General permission in Tier 3 to Tier 6 centres

ANNEX – 11 - Reporting format for operationalisation of  Off site ATMs by banks

ANNEX – 12 - Conditions subject to which Off-site ATMs can be operationalised by banks

ANNEX – 13 - Facilities which can be provided through ATMs

ANNEX – 14 - Proforma – I & Proforma II

APPENDIX - List of Circulars consolidated in the Master Circular

Master Circular on Branch Authorisation

A.Purpose

To provide a framework of rules /regulations/procedures to be followed by banks while opening/shifting/closing branches in India in accordance with provisions of Section 23 of the Banking Regulation Act, 1949.

B.Classification

A statutory guideline issued by Reserve Bank of India.

C.Previous guidelines consolidated

The Master Circular updates the instructions contained in the circulars listed in the Appendix.

D.Scope of Application

To all commercial banks (other than RRBs) including Local Area Banks.

Structure

  1. Introduction
  2. Definition
  3. Branch Authorisation Policy
  4. Procedure for Application
  5. Validity of Authorisation
  6. Opening of Branches
  7. Setting up of Off Site ATMs – General Permission
  8. Substitution of Centres
  9. Setting up of Central Processing Centres / Back Offices
  10. Call Centres
  11. Business Facilitator / Business Correspondent Model
  12. Door Step Banking
  13. Shifting of Branches
  14. Conversion of Branches
  15. Merger of Branches
  16. Closure of Branches
  17. Acquisition of premises
  18. Population Group wise classification of centres
  19. Reporting to Reserve Bank of India
  20. Foreign Banks

Annex – 1 - FORM VI (Form of application for permission to open a new place of business)
Annex – 2 - Summary of branches proposed to be opened
Annex – 3 (A) - State-wise, population-group-wise number of existing branches in underbanked/other than underbanked districts
Annex – 3 (B) - State-wise, population-group-wise number of existing ATMs in underbanked/other than underbanked districts Annex – 3 (C) - State-wise, population-group-wise number of existing extension counters
Annex – 3 (D) - Information to be submitted along with Annual Branch Expansion Plan
Annex – 4 - List of Underbanked districts
Annex – 5 - Details of Tier-wise classification of centres based on population
Annex – 6 - List of Underbanked Districts in Underbanked States
Annex – 7 - Proposals for shifting of branches from one centre to another centre
Annex – 8 - Proposals for merger of branches
Annex – 9 -  Proposals for closure of branches
Annex – 10 - Reporting format for opening of branches under general permission In Tier 3 to Tier 6 centres
Annex - 11 - Reporting format for operationalisation of Off site ATMs by banks
Annex–12 -  Conditions subject to which Off-site ATMs can be operationalised by banks
Annex- 13 - Facilities which can be provided through ATMs
Annex – 14 -  Proforma – I & Proforma- II
Appendix - List of Circulars consolidated in the Master Circular

1. 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. Commercial banks (other than RRBs) including Local Area Banks should approach Department of Banking Operations & Development, Central Office in this regard.

The policy for authorisation of branches in India is summarized in the following paragraphs.

2. Definition

For the purpose of branch authorisation policy, a “branch” would include a full-fledged branch, a satellite office, an Extension Counter, an off-site ATM (Automated Teller Machine), administrative office, controlling office, service branch (back office or processing centre) and credit card centre. A call centre will not be treated as a branch. A call centre is one where only accounts or product information is provided to the customer through tele-banking facility and no banking transaction is undertaken through such centres. Also, no direct interface with clients/ customers is permitted at call centres.

3. Branch Authorisation Policy

(i) With the objective of liberalising and rationalising the branch authorisation policy, a framework for a branch authorisation policy which would be consistent with the medium term corporate strategy of banks and public interest has been put in place. In addition to the requirement relating 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, the branch authorisation policy framework would have the elements enumerated in the following paragraphs.

(ii) As regards the public interest dimensions of the policy framework, the following aspects would be kept in view in processing the authorisation requests:

  1. The RBI will, while considering applications for opening branches give weightage to the nature and scope of banking facilities provided by banks to common persons, particularly in underbanked areas (districts), actual credit flow to the priority sector, pricing of products and overall efforts for promoting financial inclusion, including introduction of appropriate new products and the enhanced use of technology for delivery of banking services.
  2. Such an assessment will include policy on minimum balance requirements and whether depositors have access to minimum banking or “no frills” banking services, commitment to the basic banking activity viz., acceptance of deposits and provision of credit and quality of customer service as, inter alia, evidenced by the number of complaints received and the redressal mechanism in place in the bank for the purpose.
  3. The need to induce enhanced competition in the banking sector at various locations.
  4. Regulatory comfort will also be relevant in this regard. This would encompass:

    • compliance with not only the letter of the regulations but also whether the bank’s activities are in compliance with the spirit and underlying principles of the regulations.
    • the activities of the banking group and the nature of relationship of the bank with its subsidiaries, affiliates and associates.
    • quality of corporate governance, proper risk management systems and internal control mechanism.

(iii) As regards the procedural aspects, the existing system of granting authorisations for opening individual branches from time to time has been replaced by a system of giving aggregated approvals, on an annual basis, through a consultative and interactive process. Banks' branch expansion strategies and plans over the medium term would be discussed by the RBI with individual banks. The medium term framework and the specific proposals would cover the opening, closing, shifting, merger and conversion of all categories of branches.

(iv) In terms of the existing branch authorisation policy, banks will not be required to approach Regional Offices of Reserve Bank of India for “licence”for opening branches.

(v) Domestic scheduled commercial banks (other than RRBs) are permitted to open branches in Tier 3 to Tier 6 centres (with population upto 49,999 as per Census 2001 – details of classification of centres tier-wise furnished in Annex 5) without permission from Reserve Bank of India in each case, subject to reporting. Domestic scheduled commercial banks (other than RRBs) are also permitted to open branches in rural, semi-urban and urban centres in North Eastern States and Sikkim without permission from Reserve Bank of India in each case, subject to reporting.

(vi) Opening of branches by domestic scheduled commercial banks (other than RRBs) in Tier 1 and Tier 2 centres (centres with population of 50,000 and above as per 2001 Census) will continue to require prior permission of the Reserve Bank of India, except in the case of North Eastern States and Sikkim where the general permission would cover semi-urban and urban centres also.

(vii) The number of branches which would be authorized by the Reserve Bank of India based on such applications would depend, inter alia, upon various aspects, including a requirement that banks may plan their annual branch expansion in such a manner, that at least one-third of total number of branches opened in a financial year in Tier 3 to Tier 6 centres are in underbanked districts of underbanked States (as per Annex 6), as also upon a critical assessment of the bank’s performance in financial inclusion, priority sector lending, customer service etc.

(viii) The general permissions referred to at para 3 (v) above would be subject to regulatory/supervisory comfort in respect of the bank concerned and RBI would have the option to withhold the general permissions now being granted, on a case-to-case basis, taking into account all relevant factors.

4 Procedure for application

4.1 Based on the medium term strategy and considerations outlined in paragraph 3 above, banks should submit, on an annual basis, detailed proposals for opening new branches at specific centres, for which prior permission is required from RBI, in the prescribed Form VI in terms of Rule 12 of the Banking Regulation (Companies Rules), 1949, to the Department of Banking Operations and Development, Central Office, Reserve Bank of India, Mumbai for approval. The Proforma of Form VI is enclosed in Annex 1. The summary of branches proposed to be opened may be submitted as per proforma in bilingual format in Annex 2. Along with this, information sought in Annex 3 (A, B, C & D)should also be furnished. The Form VI is not required to be submitted in respect of Administrative Offices/ Controlling Offices, Credit Card Centres and Back Offices/ Processing Centres.

4.2 Banks are free to submit their annual branch expansion plan any time during the year. It is not linked either to the financial year or calendar year. The annual branch expansion plan should include specific proposals for opening, closing, shifting, merger and conversion of branches where prior permission of RBI is required in terms of the extant instructions. The annual branch expansion plan will be discussed with the bank, normally, within four weeks from its submission and approvals thereof will be communicated thereafter.

4.3 Notwithstanding the above, banks may approach RBI for any urgent proposals regarding opening of branches, especially in under banked areas(districts) anytime during the year, in addition to the authorizations granted under the annual plan, which would be considered on merit.

4.4 The Annual Branch Expansion Plan (ABEP) and any other proposals required to be submitted to RBI in this regard should have approval of Board of Directors of the Bank or such other authority to which powers have been delegated by the Board of the bank.

5.Validity of authorisations

5.1 The validity of the authorisation granted would be one year from the date of the issue of the letter of authorisation/ permission.

5.2 Generally, no extension in validity period of the authorisation would be allowed. However, in case a bank is unable to open a particular branch due to genuine reasons during the validity period of one year, they may approach the Regional Office concerned of RBI / DBOD, CO (in respect of branches in Maharashtra & Goa), before expiry of validity period of authorisation for extension of time for a further period not exceeding one year.

5.3 At centres where a bank fails to open a branch within the validity period of the authorisation i.e. one year (or within the extended time of another year, as the case may be), the permission granted would automatically lapse and if a bank is still interested in opening the branch at that centre, they should include the same in their Annual Branch Expansion Plan.

6 Opening of branches

6.1 As indicated in paragraph 3(v) above, domestic scheduled commercial banks (other than RRBs) are permitted to open branches in Tier 3 to Tier 6 centres, as also in rural, semi-urban and urban centres in North Eastern States and Sikkim without permission from Reserve Bank of India in each case, subject to reporting as per the format enclosed
(Annex 10).

6.2 Banks may include all proposals for opening of branches in such centres where permission from RBI is required, in the annual branch expansion plan. Further, banks are encouraged to open branches in underbanked districts and rural centres. In order to facilitate banks to identify centres in underbanked districts, a list of such districts is given in Annex 4. Similarly a list of underbanked districts of underbanked States, is given in Annex 6.

6.3 In order to ensure even spread of banking in the underbanked districts, it has been decided that proposals submitted by banks for opening of branches in underbanked districts would be considered provided that the location of the proposed branch is not:

(a) within the municipal limits of State Capital, a Metropolitan Centre or a District Headquarters and
(b) within 100 kms. from the 4 major Metropolitan Centres (Mumbai, New Delhi, Kolkata and Chennai) and 50 kms. from a State Capital.

However, the above restrictions at (a) and (b) will not be applicable in cases where the location of the proposed branch is in the State of Jammu & Kashmir or any of the 7 North Eastern States viz., Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland,Tripura and Sikkim.

Notwithstanding the provisions as indicated above, RBI would consider, proposals from banks for opening branches at centres located within underbanked districts which fall within the category of (a) and (b) above, on a case-by-case basis, provided the bank is able to satisfy RBI that the location of the proposed branch is really underbanked.

6.4 Further, new private sector banks are required to ensure that at least 25% of their total branches are in semi-urban and rural centres on an ongoing basis.

7 Setting up of Off-site ATMs – General Permission

Scheduled Commercial Banks are permitted to install Off-site ATMs at centres/places identified by them, without permission from the Reserve Bank. This would, however, be subject to any direction which the Reserve Bank may issue, including for closure/shifting of any such Off-site ATMs, wherever so considered necessary by the Reserve Bank. The banks should report full details of the Off-site ATMs installed by them in terms of the general permission to the Regional Office concerned of Department of Banking Supervision/ DBOD, CO (in respect of Off-Site ATMs in Maharashtra and Goa) immediately after operationalisation and in any case not later than two weeks, as per the format enclosed (Annex 11). The conditions subject to which Off-site ATMs can be operationalised by banks and the facilities which can be provided by banks through ATMs have been furnished in Annex 12 and Annex 13 of this circular.

(ii) Banks are advised to take necessary steps to provide all existing ATMs / future ATMs with ramps so that wheel chair users / persons with disabilities can easily access them and also make arrangements in such a way that the height of the ATM does not create an impediment in its use by a wheelchair user. Banks may also take appropriate steps including providing ramps at the entrance of the bank branches so that the persons with disabilities / wheel chair users can enter the bank branches and conduct business without much difficulty.

(iii) Further, banks should make at least one third of new ATMs installed as talking ATMs with Braille keypads and place them strategically in consultation with other banks to ensure that at least one talking ATM with Braille keypad is generally available in each locality for catering to needs of visually impaired persons. Banks may also bring the locations of such talking ATMs to the notice of their visually impaired customers.

8. Substitution of centres

8.1 While finalising the centre/ place for opening of a branch, banks should make proper assessment, keeping in view the business potential for opening of the branch thereat. Normally substitution of centres would not be allowed. However, under exceptional circumstances, if banks are unable to open branch at the proposed centre due to genuine problem, banks should approach DBOD, CO alongwith reasons thereof, once in a year. The bank should submit Form VI in respect of the new centre. All such requests will be examined on a case-to-case basis.

8.2 Substitution of centres would be allowed to centres of a similar population group or to a lower population group provided banks undertake to open the branch within the period of validity of authorisation issued. Further, the substitution would not be allowed from a centre in underbanked district to a centre in other than underbanked district.

9. Setting up of Central Processing Centres/ Back offices

Banks may also set up 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. on requests received from other branches and other functions incidental to banking business. These CPCs/ Back Offices should have no direct interface with customers. These CPCs/ Back Offices would be termed as Service Branches and would not be allowed to be converted into General Banking Branches. The proposals for these CPCs/ Back Offices may be included in the annual branch expansion plan.

10. Call Centres

As no banking transaction is undertaken at a call centre, no permission is required for establishment of a “call centre” as defined in paragraph 2. However, details of opening, closure and shifting of call centres should be reported to RBI as provided in paragraph 19.

11. Business Facilitator/ Business Correspondent Model

11.1 With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector, banks 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.

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

i) NGOs / SHGs
ii) Farmers Clubs
iii) Cooperatives
iv) Community based organizations
v) IT enabled rural outlets of corporate entities
vi) Post Offices
vii) insurance agents
viii) Well functioning Panchayats,
ix) Village Knowledge Centres
x) Agri Clinics
xi) Agri Business Centres
xii) Krishi Vigyan Kendras
xiii) KVIC / 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 Self Help Groups / Joint Liability Groups; (vi) post-sanction monitoring; (vii) monitoring and handholding of Self Help Groups / Joint Liability Groups / Credit Groups / others; and (viii) follow-up for recovery.

11.2 Under the "Business Correspondent" model, banks are permitted to use the services of:

  1. Companies registered under Section 25 of the Companies Act, 1956
  2. Retired bank employees, ex-servicemen and retired Government employees
  3. Individual kirana / medical / fair price shop owners
  4. Individual Public Call Office (PCO) operators
  5. Agents of Small Savings schemes of Government of India / Insurance Companies
  6. Individuals who own Petrol Pumps
  7. Retired teachers
  8. Authorised functionaries of well run Self Help Groups (SHGs) linked to Banks
  9. Any individual, including those operating Common Service Centres (CSCs)

as Business Correspondents. In case duly appointed BCs of banks desire to appoint sub-agents at the grass-root level to render the services of a BC, banks have to ensure that (i) the sub-agents of BCs fulfill all relevant criteria stipulated for BCs in terms of our extant guidelines and (ii) the distance criteria, as applicable, from the base branch should invariably be fulfilled in the case of all sub-agents.

In addition to the activities listed under the "Business Facilitator" model, the scope of the activities to be undertaken by the Business Correspondents will include (i) disbursal of small value credit, (ii) recovery of principal / collection of interest (iii) collection of small value deposits (iv) sale of micro insurance / mutual fund products / pension products / other third party products and (v) receipt and delivery of small value remittances / other payment instruments. Banks have been permitted by Reserve Bank of India to formulate a scheme for using the entities listed above for the activities mentioned above.

11.3 As the entire objective of permitting banks to use the Business Facilitator/Business Correspondent model is to extend savings and loan facilities to the underprivileged and unbanked population, these models should not be utilized for collecting NRE/NRO/FCNR(B) deposits which are generally of a large value.

11.4 Banks should invariably offer pass book facility to all its savings bank account holders (individuals) including those whose accounts are opened through Business Facilitator/Business Correspondent model. In case the bank offers the facility of sending statement of account and the customer chooses to get statement of account, the banks must issue monthly statement.

11.5 With a view to ensuring the viability of the BC model, banks (and not BCs) are permitted to collect reasonable service charges from the customer, in a transparent manner under a Board-approved policy.

11.6 A copy of the Board-approved policy in this regard may be forwarded to us (The Chief General Manager-in-charge, Reserve Bank of India, Department of Banking operations and Development).

11.7 Banks should in particular ensure that there are no complaints from the customer about the charges being non-transparent / not reasonable. Any unfair practices adopted by banks in this regard would be viewed seriously by Reserve Bank of India.

11.8 As regards the North Eastern Region, where a local organization / association not falling under any of the forms of organizations listed in the Reserve Bank guidelines is proposed to be appointed by a bank as Business Correspondent after due diligence and is recommended by the DCC for being approved as Business Correspondent, the same would be considered by the Regional Office of the Reserve Bank for granting suitable exemption from the Reserve Bank guidelines for appointing such entities as BCs.

11.9 The maximum distance criteria (distance between the place of business of a BC and the base branch) for the operation of a Business Correspondent (BC) for rural, semi urban and urban areas is 30 kms and for metropolitan areas is 5 kms. However, if the need is felt to relax the distance criteria, the matter can be referred to the District Consultative Committee (DCC) of the District concerned for approval. Where such relaxations cover adjoining Districts, the matter may be cleared by the State Level Banker's Committee (SLBC), which shall also be the concerned forum for metropolitan areas.

12. Doorstep Banking

Banks are permitted to prepare schemes for offering Doorstep Banking facilities to their customers (including individuals, Corporate, PSUs, Government Department etc.), with the approval of their Boards, in accordance with the guidelines issued by Reserve Bank of India.

13. Shifting of branches

13.1 General

(a) Shifting of branches should be part of the medium term corporate strategy of branch expansion. Accordingly, proposals requiring approval of RBI should be included in the annual branch expansion plan as per proforma in Annex 7.

(b) Banks 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.

(c) The details of shifting (i.e. new address, date of shifting etc.) should be reported to the Regional Office concerned of RBI / DBOD CO (in respect of branches in Maharashtra & Goa) immediately after shifting the branch, and in any case not later than two weeks after the shifting. No amendment in licence would be required in such cases.

(d) The shifting of branches should also meet the following minimum criteria:

(i)The new centre is of the same or lower population group as the existing centre e.g. a branch at a rural centre can be shifted to another rural centre only; and

(ii) A branch located in underbanked district can be shifted to another centre in an underbanked district only.

13.2  Shifting within the centre (city/ town/ village)

Banks have been given freedom to shift a branch to any location within the centre (city/ town / village) without seeking prior approval from RBI. As such, these cases should not be included in the annual branch expansion plan for our approval.

13.3 Rural branches

13.3.1  Within the block

As a matter of policy, shifting of sole rural branch outside the centre / village is not permitted, as such shifting would render the centre unbanked. However, under exceptional/unforeseen circumstances (natural calamity, adverse law and order conditions etc.,) if the bank is proposing to shift any sole rural branch outside the centre, DCC approval should be obtained and proposal thereof should be included in the annual plan for our consideration.

Banks are, however, free to shift their rural branches within the block, from centres which are served by more than one branch of a commercial bank, without obtaining prior approval of RBI. While considering shifting of branches, banks should keep in mind the role entrusted to these branches under the Government sponsored programmes.

13.3.2  Outside the Block

Requests for shifting of branches from centres, which are served by more than one commercial bank branch (excluding Regional Rural Bank branch) outside the block should be included in the annual branch expansion plan and the same will be considered based on the following parameters:

(i) Branches being shifted are in existence for five years or more and are incurring losses consecutively for the last three years;
(ii) Branches located at centres prone to certain natural risks such as, floods, landslides or likely to be submerged due to construction of dams or affected by any natural calamities etc;
(iii) Branches functioning in places where law and order problem, insurgency or terrorist activities pose threat to bank personnel and property;
(iv) Branches where the premises occupied by the bank are in a dilapidated condition or burnt/destroyed and no suitable premises are available at the centre etc.

13.4 Metropolitan, Urban and Semi Urban branches

(a)The banks may at their discretion shift their branches in metropolitan/urban/semi urban centres within the municipal revenue limit of that centre i.e. city/town without prior approval from RBI.

(b) Banks may also shift their branches in metropolitan/urban/semi-urban centres within the same State (except single semi-urban branches as such shifting would render the semi-urban centre unbanked) subject to the minimum criteria stated in para 13. 1 (d) – (i) & (ii)  above.

As such, these cases should not be included in the annual branch expansion plan for our approval.

13.5 Part-shifting of branches

Banks will have to approach RBI(DBOD, Central Office, BL Division for domestic banks and DBOD, Central Office, International Banking Division (IBD) for foreign banks) for approval for shifting of some activities/ part-shifting of the branch. Part shifting of the branches will be considered by RBI on a case-to-case basis subject to the following norms:

(i) No part shifting would be considered within three years of opening of a branch.
(ii) Part shifting of only one branch per Metropolitan centre/State Capital would be permitted for each bank in a calendar year.
(iii) The new location for part shifting should be within 250 meters of the existing location.
(iv) For a single branch, only one part shifting will be permitted. Once a branch has been allowed part shifting, the new location as well as the existing location will not be eligible for part shifting.
(v) To qualify for part-shifting, the area of the new location / premises should not be more than the area of the existing location.
(vi) The same activity cannot be carried out at both the locations / premises.

14. Conversion of branches

14.1 Conversion of Specialised branch

Banks may convert a specialized branch into another category of specialized branch or a general banking branch at their discretion. However, it may be ensured that details thereof are advised to the Regional Office concerned of RBI / DBOD, CO (in respect of branches in Maharashtra & Goa) immediately after the conversion of the branch, and in any case not later than two weeks after conversion. No amendment to licence/ authorization would be required. Such cases should not be included in the annual branch expansion plan for our approval.

14.2 Conversion of general banking branches to any type of specialized branch

Banks are free to convert their general banking branches into Specialised branches subject to the condition that the bank should continue to serve the existing customers of the general banking branches, which are being converted into specialized branches. Such cases should not be included in the annual branch expansion plan for our approval.

However, it may be ensured that details thereof are advised to the Regional Office concerned of RBI / DBOD, CO (in respect of branches in Maharashtra & Goa) immediately after the conversion of the branch, and in any case not later than two weeks after conversion. No amendment to licence/ authorization would be required.

14.3 Upgradation of Extension Counters and Satellite Offices into full – fledged branches

(i) Banks are free to convert their existing Extension Counters (ECs) and Satellite Offices (SO) into full-fledged branches at their discretion and relocate them within that centre. However, banks should surrender the licences (if separate licence has been issued) of Extension Counters/ Satellite Office and obtain a permission letter for full-fledged branch before effecting upgradation, from the Regional Office concerned of RBI/ DBOD CO(in respect of ECs in Maharashtra & Goa). Such cases should not be included in the annual branch expansion plan for our approval.

(ii) In cases where banks desire to upgrade their existing Extension Counters and Satellite Offices into full-fledged branches and relocate the same to another centre, such proposals should be submitted to RBI (DBOD CO) for approval.

14.4 Conversion of Rural branch into Satellite Office

Conversion of a rural branch into satellite office is generally not favoured. However, in exceptional circumstances, such proposals may be considered. The proposals for conversion of rural branches into satellite offices should be submitted along with the annual branch expansion plan after obtaining the approval from the District Consultative Committee (DCC) for our consideration.

15.Merger of branches

15.1 General

(a) Banks should, ensure that customers of the branch, which is being merged (transferor branch) are informed well in time before actual merging of the branch so as to avoid inconvenience to them.

(b) The details of merger (date of merger etc.) should be reported to the Regional Office concerned of RBI / DBOD CO (in respect of branches in Maharashtra & Goa) immediately after merger of the branch, and in any case not later than two weeks after merger.

(c) After merger the licence (if separate licence has been issued) of the merged branch (transferor branch) should be surrendered to the Regional Office concerned of RBI / DBOD CO (in respect of branches in Maharashtra & Goa) for cancellation.

Where a consolidated authorization has been issued for more than one branch, it would suffice, if the bank reports the merger of the particular branch (clearly mentioning the Sl.No. of the Annex to the letter of authorisation issued in respect of the branch) to the Regional Office concerned of RBI/DBOD, CO (in respect of branches in Maharashtra and Goa).

15.2 Merger of Sole Rural/ Semi Urban Branch

As a matter of policy, merger of a sole rural branch / semi-urban branch is not permitted, as merging the same with a branch outside the centre would render the centre unbanked. However, under exceptional/ unforeseen circumstances (natural calamity, adverse law and order condition etc.,), if the bank is compelled to merge any sole rural/ semi urban branch, DCC approval should be obtained and proposal thereof should be included in the annual plan for our consideration. Details of such proposals for rural and semi urban branches are required to be furnished to us for our approval as per proforma in Annex 8.

15.3 Merger of Metropolitan, Urban and Semi Urban branches

Banks may merge one branch with another branch at Metropolitan, Urban and Semi-urban centres (not assigned any responsibility under Government sponsored programme), without seeking prior approval from RBI. As such, these proposals should not be included in the annual branch expansion plan for our approval.

16.Closure of branches

16.1 General

(a) Banks should, ensure that customers of the branch, which is being closed, are informed well in time before actual closure of the branch, so as to avoid inconvenience to them.

(b) The details of closure (i.e. date of closure etc.) should be reported to the Regional Office concerned of RBI / DBOD CO (in respect of branches in Maharashtra & Goa) immediately after closure of the branch, and in any case not later than two weeks after closure.

(c) After closure, the licence/authorisation (if a separate licence/authorisation has been issued for a single branch)of the branch should be surrendered to the Regional Office concerned of RBI / DBOD, CO (in respect of branches in Maharashtra & Goa) for cancellation. Where a consolidated authorization has been issued for more than one branch,  it would suffice if the bank reports the closure of the particular branch (clearly mentioning the Sl.No. of the Annex to the letter of authorisation issued in respect of the branch) to the Regional Office concerned of RBI/DBOD, CO (in respect of branches in Maharashtra and Goa).

16.2 Closure of Rural branches

As a matter of policy, closure of even loss making branches at rural centres having a single commercial bank branch (excluding Regional Rural Bank branch) is not permitted, as closure would render the centre unbanked. The proposal for closure of a rural branch at a centre served by more than one commercial bank branch should be included in the annual branch expansion plan after obtaining approval of District Consultative Committee (DCC). Details of such proposals are required to be furnished to us for our approval as per proforma in Annex 9.

16.3 Metropolitan, Urban and Semi Urban branches

Banks are permitted to close any branch in metropolitan, urban and semi-urban (not assigned responsibility under Government sponsored programme) centres without seeking prior approval from RBI. As such, these proposals should not be included in the annual branch expansion plan for our approval.

17. Acquisition of premises

(i)Banks have all powers relating to hiring of premises, rentals, deposits/advances to premises owners, for acquisition of accommodation on lease/rental basis for their own use (i.e., for Office and Residence of Staff).

(ii) Banks, while acquiring premises for opening of a branch, should ensure that the location of the branch complies with the local norms/ laws of Municipal Corporation/ Nagarpalika/ Town area authority/VillagePanchayat or any other competent authority.

(iii) Banks are required to forward a list of their branches/offices that are operating in premises in respect of which a dispute is pending with the landlord to the Regional Director Reserve Bank of India concerned (i.e., RD of the Regional Office of RBI under whose jurisdiction the branch/office in respect of which a dispute is pending is functioning) on a quarterly basis within a period of one month from the close of the respective quarter to which the report relates to. In respect of branches/offices situated in Maharashtra/Goa, the information will be furnished by banks to the Regional Director, Reserve Bank of India, Mumbai Office, Shahid Bhagat Singh Road, Mumbai – 400 001.

18. Population group-wise Classification of Centres

(i) For the purpose of correct classification of a centre (city/ town/ village) i.e. rural, semi urban, urban or metropolitan, the bank should mention the correct name of the revenue centre and not just the locality. For this purpose, clarification can also be obtained from the Block Development Officer, Village Panchayat, Tehsildar/ Municipality or Municipal Corporation Office/ Office of the District Collector or District Census Authority. Further, banks may also ascertain the population group-wise classification of the centre from the Department of Statistics and Information Management (DSIM), Reserve Bank of India, Banking Statistics Division, C-8/9, Bandra-Kurla Complex, Mumbai-400 051, before approaching DBOD CO with their annual branch expansion plan proposals.

(ii) In the event of change in population category of a centre on account of re-allocation/ reorganisation of villages / centres among districts or on account of amalgamation of towns/ villages/ areas, Head Offices/ Corporate Offices of the banks should approach Department of Statistics and Information Management (DISM), Reserve Bank of India, Banking Statistics Division, C-8/9, Bandra-Kurla Complex, Mumbai-400 051, regarding changes/reclassification of centre/place/district etc. along with all relevant documents (Gazette notification etc.) received from the State Government/Municipal Corporation/Nagarpalika/Town area authority/Village Panchayat or any other competent authority evidencing the changes.

19. Reporting to Reserve Bank of India

(a) Reporting to Regional offices/ DBOD, CO

Banks should report details of opening of a new place of business, closure, merger, shifting or conversion of any existing place of business immediately and in any case not later than two weeks after opening/closure/merger/shifting/conversion etc. to the Regional Office concerned of Reserve Bank of India, except in respect of branches in Maharashtra and Goa, which should be reported to DBOD, CO, Mumbai.

The banks should also report the details of opening, closure and shifting of call centres to the Regional Office concerned of Reserve Bank of India / DBOD, CO (in respect of call centres in Maharashtra & Goa).

(b) Branch Banking Statistics

Banks should submit within fourteen days of every quarter, information relating to opening, closure, merger, shifting and conversion of branches in Proformae I & II (Annex 14) to Department of Statistics and Information Management (Banking Statistics Division) and the Regional Office concerned of RBI / DBOD, CO. Further, information in respect of Authorised Dealer (AD) branches should be submitted on an on going basis. A ‘Nil' statement must be submitted in case there is nothing to report.

20. Foreign Banks

The general permission granted to domestic scheduled commercial banks vide paragraph 3 (v) will not be applicable to foreign banks.

The Branch Authorisation Policy (paragraph 3 of this circular except 3(v)) would be applicable to foreign banks, subject to the following:

  • Foreign banks are required to bring an assigned capital of US$25 million upfront at the time of opening the first branch in India.
  • Existing foreign banks having only one branch would have to comply with the above requirement before their request for opening of second branch is considered.
  • Foreign banks will be required to submit their branch expansion plan on an annual basis.
  • In addition to the parameters laid down for Indian banks, the following parameters would also be considered:
    • Foreign bank’s and its group’s track record of compliance and functioning in the global markets would be considered. Reports from home country supervisors will be sought, wherever necessary.
    • Weightage would be given to even distribution of home countries of foreign banks having presence in India.
    • The treatment extended to Indian banks in the home country of the applicant foreign bank would be considered.
    • Due consideration would be given to the bilateral and diplomatic relations between India and the home country.
    • The branch expansion of foreign banks would be considered keeping in view India’s commitments at W.T.O. ATMs would not be included in the number of branches for such computation.

Accordingly, foreign banks should submit their annual branch expansion plan to the Department of Banking Operations and Development, International Banking Division, Central Office, Central Office Building(12th Floor), Shahid Bhagat Singh Marg, Mumbai – 400 001.


Appendix

List of Circulars consolidated by the Master Circular

No.

Circular No.

Date

Subject

1

DBOD.No.BL.BC.99/22.01.009/2009-2010

26.04.2010

Financial Inclusion by Extension of Banking Services – Use of Business Correspondents (BCs)

2

DBOD.No.BL.BC.72/22.01.001/2009-10

01.02.2010

Section 23 of the Banking Regulation Act, 1949 – Relaxations in Branch Authorisation Policy

3

DBOD.No.BL.BC.65/22.01.001/2009-10

01.12.2009

Section 23 of the Banking Regulation Act, 1949 – Relaxations in Branch Authorisation Policy

4

DBOD.No.BL.BC.63/22.01.009/2009-10

30.11.2009

Financial Inclusion by Extension of Banking Services – Use of Business Correspondents (BCs)

5

DBOD.No.BL.BC.137/22.01.001/2008-09

12.06.2009

Section 23 of Banking Regulation Act, 1949 -Relaxations in Branch Authorisation Policy - Off Site ATMs

6

DBOD.No.BL.BC.129/22.01.009/2008-2009

24.04.2009

Financial Inclusion by Extension of Banking Services –Use of Business Correspondents (BCs)

7

DBOD.No.BL.BC.36/22.01.009/2008-2009

27.08.2008

Financial Inclusion by Extension of Banking Services –Use of Business Correspondents (BCs)

8

DBOD.No.BL.BC.35/22.01.009/2008-2009

27.08.2008

Financial Inclusion by Extension of Banking Services –Use of usiness Correspondents (BCs) – Section 25 companies

9

DBOD.No.BL.BC. 32/22.01.03/2008-09

21.08.2008

Acquisition of accommodation on Lease/Rental basis by Commercial Banks for their branches/offices – Liberalisation of guidelines.

10

DBOD.No.BL.BC.16/22.01.001/2008-09

01.07.2008

Master Circular on Branch Authorisation

11

DBOD.No.BL.BC.74 /22.01.009/2007-2008

24.04.2008

Financial Inclusion by Extension of Banking Services – Use of Business Facilitators and Correspondents

12

DBOD.No.BL.BC.16/22.01.001/2007-08

02.07.2007

Master Circular on Branch Authorisation

13

DBOD.No.BL.BC.99 /22.01.010/2006-2007

24.05.2007

Doorstep Banking

14

DBOD.No.BL.BC.59/22.01.010/2006-2007

21.02.2007

Doorstep Banking

15

DBOD.No.BL.BC.11/22.01.001/2006

01.07.2006

Master Circular on Branch Authorisation

16

DBOD.No.BL.BC.72 /22.01.009/2005-2006

22.03.2006

Financial Inclusion by Extension of Banking Services – Use of Business Facilitators and Correspondents

17

DBOD.No.BL.BC.58 /22.01.001/2005-2006

25.01.2006

Financial Inclusion by Extension of Banking Services – Use of Business Facilitators and Correspondents

18

DBOD.No.BL.BC.55/22.01.001/2005-06.

23.01.2006

Branch Authorisation Policy

19

DBOD.No.BL.BC.35/22.01.001/2005-06.

08.09.2005

Liberalization of Branch Authorisation Policy

20

DBOD.No.BL.BC.24/22.01.001/2005-06.

03.08.2005

Branch Expansion Strategy of banks

21

DBOD.No.BL.BC.92/22.01.001/2004-05.

20.05.2005

Submission of Quarterly Return-Proformae I &II

22

DBOD.No.BL.BC.86/22.01.001/2004-05

30.04.2005

Doorstep Banking

23

DBOD.No.BL.BC.82/22.01.001/2004-05.

27.04.2005

Shifting of branches/ offices-Rationalization of procedure

24

DBOD.No.BL.BC.39/22.01.001/2004-05.

10.09.2004

Opening of central processing centres/ back offices etc.

25

DBOD.No.BL.BC.23/22.01.001/2003.

11.09.2003

Providing Depository Services at Extension Counters.

26

DBOD.No.BL.BC.13/22.01.001/ 2003.

18.08.2003

Take over of bank branches.

27

DBOD.No.BL.BC.5/22.01.001/ 2003.

23.07.2003

Third party transfer of funds through ATMs.

28

DBOD.No.IBS.BC.32/23.03.001/ 2002-2003.

17.10.2002

Closure of branches of foreign banks.

29

DBOD.No.BL.BC.74/22.01.001/ 2002.

11.03.2002

Conversion of General Branches into Specialised SSI branches.

30

DBOD.No.BL.BC.62/22.01.001/ 2002.

28.01.2002

Third Party advertisement on ATM Network.

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.No. BL.BC 13 /22.01.03/ 2000-01

04.08.2000

Acquisition of Accommodation on Lease/Rental basis by
Commercial Banks for their use

33

DBOD.BC.No.127/12.05.005/ 99-2000.

30.11.1999

Rationalisation of Returns submitted by banks to RBI

34

DBOD.No.BL.BC.105/22.01.03/98

11.11.1998

Acquisition of Accommodation on Lease/Rental basis by
Commercial Banks for their use

35

DBOD.No.BL.BC.74/22.01.001/ 98.

29.07.1998

Shifting of Rural branches outside the Block/ Service Area and closure of rural branches.

36

DBOD.No.BL.BC.115/22.06.001/ 97

21.10.1997

Branch Banking Statistics-Submission of Monthly Returns-Revision of Proformae II & III

37

DBOD.No.BL.BC.64/22.01.003/ 97.

05.06.1997

Opening of offices of commercial banks in the National Capital Territory (NCT) of Delhi.

38

DBOD.No.BL.BC.76/22.01.001/ 96.

17.06.1996

Delegation of administrative powers to Regional Offices of DBOD.

39

DBOD.No.BP.BC.60/21.03.051/ 96

16.05.1996

Automated Teller Machines (ATMs)

40

DBOD.No.BP.BC.123/21.03.051/ 95.

16.10.1995

Automated Teller Machines (ATMs)

41

DBOD.No.BP.BC.152/21.03.051/ 94

29.12.1994

Automated Teller Machines (ATMs)

42

DBOD.No.BL.BC.152/22.01.001/ 93

24.08.1993

Opening /Closing of bank branches.

43

DBOD.No.BL.BC.41/22.01.001/ 92.

09.10.1992

Delegation of authority to
banks for shifting of offices, spinning-off of business etc.

44

DBOD.No.BL.BC.132/22.01.001/ 92.

20.05.1992

Delegation of authority to banks for shifting of offices, opening of controlling offices, spinning-off of business etc.

45

DBOD.No.BL.BC.24/BL.66/91

06.09.1991

Change in names of offices/branches in Kerala.

46

DBOD.No.BL.BC.132/C.168 (M)-91.

11.06.1991

Opening of Specialised Housing Finance Branches.

47

DBOD.No.BL.BC.81/C168 (64D)-91.

16.02.1991

Opening/closing of bank branches.

48

DBOD.No.BL.BC.68/C168 (64D)-91

16.01.1991

Approach to future branch expansion.

49

DBOD.No.BL.BC.16/C168 (64D)-90

12.09.1990

-do-

50

DBOD.No.BL.BC.72/C168 (64D)-87

14.12.1987

Branch Licensing Policy 1985-90 -Setting up of Satellite/mobile branches.

51

DBOD.No.BL.BC.86/C168-84

21.08.1984

Change in the name of branch necessitated due to change in name of locality/street etc.

52

DBOD.No.BL.BC.147/C168-78

20.10.1978

Change in name of branches of banks

53

DBOD.No.BL.99/C.168-68

19.01.1968

Opening of Mobile Offices

 
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