RBI lifts branch ban on scan-tainted banks

The Reserve Bank of India (RBI) has permitted ICICI Bank to open new
branches and set up off-site ATMs. This signifies the lifting of ban,
imposed by the banking regulator, on branch expasion of a slew of commercial
banks involved in the initial public offer (IPO) allotment scam. These banks
were also penalised for their role in the scam.

Sources said, HDFC Bank would also soon be allowed to open new branches. The
central bank has called officials of HDFC Bank, another bank tainted in the
scam, for a meeting to discuss its branch expansion plans. It had asked the
bank officials to furnish details on the current state of its risk management procedures.

RBI Governor Y V Reddy had last month stated that the RBI would allow these
banks to open new branches once it is convinced about the improvements in
their risk control systems.

In a one-line statement, ICICI Bank, the country's second largest bank, said
it has "received Reserve Bank of India's approval for establishing new
branches and additional off-site ATMs." It, however, did not disclose the
number of branches and off-site ATMs it can open.

The ban on expansion was imposed following penalties imposed in January 2006
on nine banks - Bharat Overseas, Citibank, HDFC Bank, ICICI bank, Indian
Overseas bank, Standard Chartered Bank, Vijaya Bank, IDBI Bank and ING Vysya
Bank - for violation of RBI instructions on extending finance to retail
customers for purchase of shares in initial public offers.

Initially, RBI wanted to impose a three-year ban. These banks were not
allowed to open new branches last calendar year. This year too they have not
been permitted to open new branches. The permission to open branches will
probably take effect in January. In other words, the ban continued for two
years. Licences for opening new branches are given in  a calendar year after
the banks submit their annual plans.

Banking sources said ICICI Bank has received permission to open branches in
rural areas and off-site ATMs primarily in semi-urban centres.