Banks free to open branches in tier-1 centers: RBI

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The Reserve Bank of India today allowed the banks to open branches in tier-1 centers without taking its permission in each case. Tier-1 centers are those with population above 1 lakh as per 2001 census. 

Raghuram Rajan on the day of his taking charge had announced freeing of branch expansion policy. 

 

RBI has however put certain conditions for opening such branches. The banks have to open 25% of their branches in a financial year in unbanked tier-5 and tier-6 centers as earlier. 

 

“Total number of branches in tier -1 center’s can’t exceed the number of branches opened in tier-2 to tier-6 centers during a year”, RBI said in a circular to the banks. As a incentive to open rural branches, the banks would be permitted to open equal number of branches in tier – 1 centers which they open in under-banked districts of under-banked states excluding the mandatory 25% branches. 

 

If the bank is unable to open all tier – 1 branches during that year, they can carry it over for next two years, said RBI.  Also the banks if unable to open requisite branches in tier- 2 to tier- 6 centers for some reason, it should necessary rectify the shortfall in the next financial year, said central bank. 

 

However this general permission would be subject to compliance with  all the instructions and also regulatory and supervisory comfort in respect of the individual banks.  RBI can withhold  the general permission to open branches if the banks fail to meet the criteria  and take penal measures on banks which fail to branches in tier-2 to tier-6 centers, warned the central bank.