The Reserve Bank of India (RBI) will henceforth take into account banks' policies on minimum balance requirements, pricing of products and commitment to basic banking activity, while considering applications for opening of new branches. | |
| This comes as part of the public interest dimensions of the central bank's policy framework for a liberalised branch authorisation. |
| |
| In a circular, the RBI said it will give weightage to the nature and scope of banking facilities provided by banks to common persons, particularly in underbanked areas, 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. |
| |
| It said, 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-acceptance of deposits and provision of credit-and quality of customer service as, interalia, as evidenced by the number of complaints received and the redressal mechanism in place in the bank for the purpose. |
| |
| 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, administrative office, controlling office, service branch (back office or processing centre) and credit card centre. A call centre , however, will not be treated as a branch. |
| |
| The RBI has done away with need for banks to obtain case-by-case license to for branch in the country. Now banks will need to present medium-term branch plan and obtain authorisation of annual basis for opening and shifting of branches including Automated Teller Machines and offices. |
| |
| The new framework for a branch authorisation policy will have to be consistent with the medium-term corporate strategy of banks and public interest. The branch expansion strategies and plans over the medium term would be discussed with individual banks. |
| |
| The authorisations given on an annual basis would be valid for one year. The current policy for authorisation of overseas branches of Indian banks will continue. |
| |
| As a transitional arrangement, however, it is proposed to consider urgent requests from banks for processing their applications already submitted to the RBI and approve those, on a case-by-case basis, which are considered to be broadly in consonance with the above policy framework. |
| |
| It also proposed to rationalise the number of categories of branches and simplify other procedures relating to authorisation of branches. RBI has prepared a list of 386 underbanked districts, which do not have sufficient number of bank branches. This factor is likely to work in conjunction with need to induce enhanced competition in the banking sector at various locations. |
| |
| The regulatory comfort will also weigh on granting approval for branches. This would encompass compliance with not only the letter of the regulation but also whether the bank's activities are in compliance with the spirit and underlying principles of the regulation. |
| |
| 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 mechanisms will also have bearing on RBI approval. |
| |
| RBI clarified that while the branch expansion of foreign banks would be considered keeping in view India's commitments at World Trade Organisation (WTO), ATMs would not be included in the number of branches for such computation. |
| |
|
| |
