Mumbai, Oct. 21: The Reserve Bank of India has given a two-year leeway to banks that are being straitjacketed by a couple of riders that were placed last month when they were granted the freedom to open branches in tier-I cities without seeking prior authorisation.
Last month, the RBI said banks would have to open at least 25 per cent of the total branches they intended to set up in a financial year (excluding the tier 1 centres) in unbanked rural (tier 5 and tier 6) centres. These are the centres that do not have a brick and mortar structure of any scheduled commercial bank for customer based transactions.
Another condition was that the total number of branches opened in tier 1 cities during a financial year could not exceed the total number of branches opened in tier 2 to tier 6 centres and all centres in the Northeast and Sikkim.
For instance, if a bank wants to open 200 branches in a financial year, at least 50 must be set up in unbanked rural centres.
Moreover, of the 200 branches, at least 100 should be set up in tier 2 to tier 6 centres and in the northeastern states and Sikkim. Thus, the maximum number of branches that a bank can set up in a tier 1 centre during a year, in this case, is 100.
In a notification issued today, the central bank said if a bank was unable to open all the branches it was eligible for in tier 1 cities during a year, it may carryover (open) these branches in the subsequent two years.
The Reserve Bank further added that banks, which for some reasons were unable to meet their obligations of opening branches in tier 2 to tier 6 centres in aggregate, or in unbanked rural centres (tiers 5 to 6 centres) during a financial year, must necessarily rectify the shortfall in the next financial year.
The apex bank has told lenders that they should prepare annual reports of the branches actually opened during a year and place them before their boards which would be later forwarded to the department of banking operations and development of the RBI.
The compliance regarding the opening of branches in accordance with the RBI stipulations will be examined during the annual financial inspection of the bank.
The changes brought in by RBI
If a bank is unable to open all the scheduled branches in tier 1 cities during a year, it may open them over the next two years
If a bank falls short of the stipulated branches in tier 2-tier 6 cities and rural centres, it will have to make up for the shortfall in the next fiscal
Banks to prepare report on the number of branches opened in a year for evaluation by board & RBI