Banks free to shift, merge or shut non-rural branches: RBI

07 Aug 2015

The Reserve Bank of India (RBI) has allowed scheduled banks to shift, merge or close all branches except rural branches and sole semi-urban branches depending on their business requirements.

RBI said it has dispensed with the earlier instructions and banks have now been allowed to shift, merge or close all branches except rural branches and sole semi-urban branches at their discretion.

Shifting, merger, or closure of any rural branch as well as a sole semi-urban branch would, however, require the approval of the banks district consultative committee or district level review committee.

Further, while shifting / merging / closing sole rural or semi-urban branches, banks may ensure that the banking needs of the centre continue to be met through either satellite offices / mobile vans or through business correspondents. However, banks should ensure that the centre is not left unbanked.

Banks should also ensure that customers of the branch, which is being shifted / merged / closed, are informed well in time before actual shifting / merger / closure of the branch, so as to avoid inconvenience to them.

Further, while considering shifting / merger / closure of branches, banks should ensure that they continue to fulfill the role entrusted to these branches under government sponsored programmes and the government's direct benefit transfer direct benefit transfer schemes.

It may further be ensured that branches are shifted / within the same or to a lower population category, ie, semi-urban branches to semi-urban or rural centres and rural branches to other rural centres.

In all such cases, if a licence had been issued for the merged / closed / shifted branch, it would have to be surrendered to the regional office concerned department of banking services (DBS) at RBI except in respect of branches in Maharashtra and Goa, which should be surrendered to DBR, CO, Mumbai.

Thus banks may shift their metropolitan, urban and semi-urban branches outside the state, and their rural branches outside the block without prior approval of RBI.

Part-shifting / bifurcation: Banks may require shifting some activities / part shift activities of a branch in any centre due to space / rent constraints, and may do so without seeking prior approval of Reserve Bank of India.

However, it may be noted that banking activity, ie, deposit or loan business cannot be maintained at both places, and the new location for part shifting would have to be within one km of the existing location. They may also spin off certain activities such as government business into separate branches at their discretion.

Opening of extension counters: Presently banks can open Extension Counters in the premises of institutions where they are the principal bankers, or obtain a NOC from the principal banker. With a view to enabling customer choice and operational freedom, the requirement of being the principal banker for opening of EC is not required.

Rationalisation of reporting requirements: At present, banks are required to report details of opening of a new place of business, including mobile branch / mobile ATMs, 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 to the regional office concerned of DBS except for branches in Maharashtra and Goa, which should be reported to DBR, CO, Mumbai. Banks should also report the details of opening, closure and shifting of call centres to regional office concerned of DBS, or DBR, CO (in respect of call centres in Maharashtra & Goa).

In addition, banks should submit information related to opening, closure, merger, shifting and conversion of branches to RBI's Department of Statistics and Information Management, Banking Statistics Division, within 14 days every quarter.

In view of these reporting requirement, banks, including LABs are no longer required to report details of opening of a new place of business including mobile branch / mobile ATMs / call centres, closure, merger, shifting or conversion of any existing place of business including call centres to the regional office concerned of DBS/ DBR CO.

They may, however, ensure that the reporting to DSIM continues.

Further, the annual report of branches actually opened during the year, may now be submitted in the revised format.

This is in line with the policy of permitting domestic scheduled commercial banks (other than RRBs) to open branches in Tier 1 to Tier 6 centres without the need to take permission from the Reserve Bank of India in each case, subject to reporting and certain other conditions.

RBI said the rationalisation of branch authorisation policy allowing banks greater operational freedom regarding merger, closure, shifting, part shifting, opening of extension counters and reporting requirements have been reviewed in light of the evolving environment.