Mumbai, Sept. 9: The Reserve Bank of India (RBI) will be more restrictive in evaluating proposals from commercial banks for opening new branches or transfer of existing ones.

The apex bank has proposed to replace the present system of giving approvals to open individual branches with collective approvals for a period of one year. It will also consider various factors such as scope of banking facilities in the proposed location besides the quality of services the applicant bank renders to its customers, its actual credit flow to the priority sector, policy on minimum balance requirements and whether its depositors have access to minimum banking.

In a circular issued on Thursday, the RBI has directed the heads of commercial banks to liberalise and rationalise the policy for authorisation of their branches in India. The central bank is also putting in place a framework for a branch authorisation policy in consistence with the medium-term strategy of banks. According to the RBI, the new policy would take into account the public interest along side procedural and regulatory dimensions.

The RBI said it would assess the nature and scope of banking facilities to common man, particularly in areas where banks are inadequate, pricing of products and use of information technology by banks while considering their applications for opening new branches.

Such an assessment, the apex bank said, would also include the applicant bank’s policy on minimum balance requirement and whether depositors have access to “no frills” services. The banker of banks added that it would also look at the mechanism put in place by the applicant bank for receiving complaints and redress them. Further, the central bank would also consider the need to induce enhanced competition among banks at various locations.