The Chairman and Managing
Director/Chief Executive Officer
All Domestic Scheduled Commercial Banks
(Excluding Regional Rural Banks), Small Finance Banks,
Payment Banks and Local Area Banks
Rationalisation of Branch
Authorisation Policy- Revision of Guidelines
Please refer to the paragraph 11
on ‘Banking Outlets – Final Guidelines’ (extract enclosed) of the Statement
on Developmental and Regulatory Policies released on April 06, 2017.
2. In this regard, it may be
recalled that in terms of announcement made in the first Bi-monthly
Monetary Policy Statement 2016-17 on April 5, 2016, it was, inter alia,
proposed to redefine branches and permissible methods of outreach keeping
in mind the various attributes of the banks and the types of services that
are sought to be provided. An Internal Working group (IWG) was constituted
for the purpose and its Report was placed on our web-site on October
6, 2016 seeking public comments.
3. Taking into account the
suggestions/feedback received from the Government of India and other
stakeholders, final guidelines on ‘Banking Outlets’ are being issued as
detailed in the Annex which shall be operational with immediate
Chief General Manager
Encl: As above
of Statement of Developmental and Regulatory Policies, Reserve Bank of
India – Issued on April 6, 2017
11. Banking Outlets: Final
Guidelines - Final guidelines are proposed to be issued on banking outlets,
clarifying on what is a ‘banking outlet’ and harmonising the treatment of
different forms of bank presence for the purpose of opening outlets in
underserved areas. These will supersede the branch licensing guidelines in
force. Detailed guidelines will be issued by end-April, 2017.
of new place of business and transfer of existing places of business
23 of the Banking Regulation Act, 1949)
1. Scope of Application
These guidelines are applicable
to all Domestic Scheduled Commercial Banks (excluding Regional Rural
Banks), Small Finance Banks, Payment Banks and Local Area Banks.
2. Date of Application
These guidelines will come into
effect from the date of issue of the Circular.
The following definitions are to
be used for the purpose of this policy framework:
3.1 Banking Outlet/Part-time
3.1.1 A ‘Banking Outlet’ for
a Domestic Scheduled Commercial Bank (DSCB), a Small Finance Bank (SFB) and
a Payment Bank (PB) is a fixed point service delivery unit, manned by
either bank’s staff or its Business Correspondent where services of
acceptance of deposits, encashment of cheques/ cash withdrawal or lending
of money are provided for a minimum of 4 hours per day for at least five
days a week. It carries uniform signage with name of the bank and
authorisation from it, contact details of the controlling authorities and
complaint escalation mechanism. The bank should have a regular off-site and
on-site monitoring of the ‘Banking Outlet’ to ensure proper supervision,
‘uninterrupted service’ except temporary interruptions due to telecom
connectivity, etc. and timely addressing of customer grievances. The
working hours/days need to be displayed prominently.
3.1.2 A banking outlet which
does not provide delivery of service for a minimum of 4 hours per day and
for at least 5 days a week will be considered a ‘Part-time Banking Outlet’.
3.2 Unbanked Rural Centre
An ‘Unbanked Rural Centre’ (URC)
is a rural (Tier 5 and 6) centre that does not have a CBS-enabled ‘Banking
Outlet’ of a Scheduled Commercial Bank, a Small Finance Bank, a Payment
Bank or a Regional Rural Bank nor a branch of Local Area Bank or licensed Co-operative
Bank for carrying out customer based banking transactions.
N.B.1: Extension Counters,
Satellite Offices, Part-shifted Branches, Ultra Small Branches and
Specialised Branches, subject to their satisfying the definition given
above, shall be treated as independent ‘Banking Outlets’ or ‘Part-time
Banking Outlets’, as the case may be.
N.B.2: ATMs, E- lobbies, Bunch
Note Acceptor Machines (BNAM), Cash Deposit Machines (CDM), E- Kiosks and
Mobile Branches will not be treated as ‘Banking Outlets’. Point of Sale
(PoS) terminals where limited cash withdrawal facility is allowed by banks
in terms of extant instructions without having an arrangement with the
concerned entities as ‘business correspondents’ will not be considered as
4. Opening of Banking Outlets –
4.1 Domestic scheduled
commercial banks (other than RRBs) are permitted to open, unless otherwise specifically restricted, Banking Outlets in Tier 1 to Tier 6 centres without
having the need to take permission from Reserve Bank of India in each case.
The policy covers the opening of ‘Banking Outlets’ in all Tiers as defined
on the basis of population as per Census 2011. The tier-wise and population
group-wise classification of centres is provided in Annex I.
4.2 The opening of ‘Banking
Outlets’ during a financial year will be subject to the conditions given
a) At least 25 percent of the
total number of ‘Banking Outlets’ opened during a financial year should be
opened in unbanked rural centres, as defined in Para 3.2 above.
b) A ‘Part-time Banking Outlet’,
opened in any Centre, will be counted and added to the denominator as well
as numerator on pro rata basis for computing the requirement as well as the
compliance with the norm of opening 25 per cent Banking Outlets in unbanked
rural centres. Some illustrations on the computation of part-time banking
outlet have been given in Annex II.
c) A ‘Banking Outlet’/‘Part-time
Banking Outlet’ opened in any Tier 3 to Tier 6 centre of North-Eastern
States and Sikkim as well as in any Tier 3 to 6 centre of Left-wing
Extremism (LWE) affected districts as notified by the Government of India
from time to time, will be considered as equivalent to opening a ‘Banking
Outlet’/ ‘Part-time Banking Outlet’, as the case may be, in a URC. A list
of 106 LWE affected districts in 10 States as notified by the Government as
on February 24, 2016 is being provided in Annex III. As the overall
objective of these guidelines is enabling expansion of banking facilities in
these underbanked/underserved centres, each banking outlet opened,
irrespective of the banked/unbanked status of the Centre, will be reckoned
as having been opened in a URC.
d) A full-fledged ‘brick and
mortar’ branch opened in a rural (Tier 5 and 6) centre which is already
being served by a fixed point BC outlet by any bank will also be eligible
to be treated as equivalent to opening a ‘Banking Outlet’ in a URC. In
other words, the first fixed point BC outlet of a bank as well as the first
‘brick and mortar’ branch of any bank opened in a URC will be reckoned for
computing compliance with the 25 per cent norm.
e) A ‘banking outlet’ opened in
a rural (Tier 5 and 6) centre which is served by only a banking outlet of a
Payment Bank will also be eligible to be treated as equivalent to opening a
‘banking outlet’ in a URC. In other words, the first ‘banking outlet’ by a
Payment Bank as well as the first ‘banking outlet’ by any other bank opened
in a URC will be reckoned for computing compliance with the 25 per cent
f) The time given to a bank for
opening an outlet in a URC is one year. If a bank fails to adhere to the
requirement of opening 25% banking outlets in a year, appropriate penal
measures, including restrictions on opening of Tier 1 branches, may be
4.3 To encourage the banks to
open/frontload more number of banking outlets in unbanked rural centres,
they will be allowed to carry forward the benefit of the ‘Banking Outlets’,
if any, opened in excess of the requirement specified in para 4.2 above,
for a period of next 2 years. No extension to avail the benefit will be
4.4. To enable banks to have
information for identifying a URC, State Level Banker Committees (SLBCs)
shall play a constructive and proactive role. The SLBCs shall compile and
have an updated list of all unbanked rural centres in the State which shall
be displayed on their website. This list will facilitate banks to
choose/indicate the place where they wish to open a ‘banking outlet.’ Banks
shall inform and coordinate with the SLBC Convenor bank to earmark the
centre identified by them. If a bank fails to open the banking outlet in
the prescribed period of 1 year as per Para 4.2 (f) above, the SLBC
convenor bank may indicate the Centre as available for other banks to open
a banking outlet. The non-member banks of the SLBC, may also refer to the
website and keep the SLBC Convenor banks informed of the centres identified
4.5 If a bank proposes to
undertake government business at any of the banking outlets/part-time banking
outlets, it would require prior approval of the Government authority
concerned as also of Department of Government and Bank Accounts, Reserve
Bank of India, Central Office.
Shifting/Conversion of ‘Banking Outlets’
5.1 Banks having general
permission may shift, merge or close all ‘Banking Outlets’ (except rural
outlets and sole semi-urban outlets) at their discretion.
5.2 Merger, Closure and shifting
of any rural ‘Banking Outlet’ as well as a sole semi urban ‘Banking Outlet’
would require approval of the DCC/DLRC. However, conversion of any rural or
sole semi-urban banking outlet into a full-fledged brick and mortar branch
and vice versa would not require such approval. While
merging/closing/shifting/converting a rural or a sole semi urban ‘Banking
Outlet’, banks and DCC/DLRC shall ensure that the banking needs of the
centre continue to be met.
5.3 Banks should also ensure
that customers of the Banking Outlet, which is being merged/closed/shifted
are informed well in time so as to avoid inconvenience to them. Further,
banks should ensure that they continue to fulfill the role entrusted to
these ‘Banking Outlets’ under the Government sponsored programmes and
Direct Benefit Transfer Schemes.
5.4 It may further be ensured
that ‘Banking Outlets’ are shifted within the same or to a lesser
population category, i.e., semi urban ‘Banking Outlets’ to semi urban or
rural centres and rural ‘Banking Outlets’ to other rural centres.
Opening/shifting/merger/closing/conversion of Banking Outlets – Guidelines
for Banks which do not have General Permission
6.1 Domestic Scheduled
Commercial Banks from whom general permission has been withdrawn, shall
obtain prior approval of Department of Banking Regulation (DBR), Central
Office, RBI for opening all their branches. Further, in respect of their
fixed point BC outlets, they shall also approach Reserve Bank for
permission except for outlets opened in Tier 5 and 6 Centres. Small Finance
Banks, Payment Banks as well as Local Area Banks (LABs) shall obtain prior
approval of DBR, Central Office, RBI for all categories of banking outlets.
These banks shall submit their Annual Banking Outlet Expansion Plan (ABOEP)
with the consolidated details of proposals for opening, closing, shifting,
merger and conversion of these banking outlets as per Proforma given in Annex
6.2 It should be ensured that
all the proposals conform to the guidelines contained in the above paras applicable
to banks having general permission. On approval of the consolidated
proposal, individual proposals for opening new branches at specific
centres, for which prior permission is required from RBI, must be submitted
in the prescribed Form VI in terms of Rule 12 of
the Banking Regulation (Companies Rules), 1949, to the DBR, Reserve Bank of
India, Central Office, Mumbai for approval. The Proforma is given at Annex
V. The ABOEP and any other proposals required to be submitted to RBI in
this regard should have the approval of the Board of Directors of the bank
or such other authority to which powers have been delegated by the Board of
the bank. Banks shall ensure that an authenticated / certified copy of such
approval is invariably submitted along with these proposals.
6.3 It is recognized that some
banks, including Small Finance Banks, not having general permission would
have taken specific approval of Reserve Bank for their Annual Branch
Expansion Plan for the current year (2017-18) including approval for
opening of 25% branches in URCs, identified as per the erstwhile definition
of a URC. It is clarified that notwithstanding the revised definition of a
URC, as per Para 3.2 above, branches opened at the centres authorized by
the RBI will be reckoned for assessing compliance with the 25% norm.
7. Grandfathering of MFI
Structure of the Small Finance Banks
7.1 In order to provide an
enabling environment to preserve the advantages of the MFI/NBFC structure
of Small Finance Banks (SFBs) and with a view to further financial
inclusion, SFBs are being allowed a time of 3 years from the date of
commencement of business, to align their banking network with the extant
guidelines. Till such time, the existing structures may continue and would
be treated as ‘Banking Outlets’ though not immediately reckoning for the 25
per cent norm.
7.2 Nevertheless, during this
period of 3 years, for all the banking outlets opened or converted from the
existing MFI branches in a year, they will have to open 25% banking outlets
in unbanked rural centres in the same year. For this purpose, Banking Outlets
converted from existing MFI branches means, such of the existing NBFC/MFI
branches where it intends to conduct banking business of accepting
deposits, allowing encashment of cheques/withdrawals besides carrying out
the current lending activities.
7.3 At the end of three years
from the date of their commencement of business, all SFBs should have
opened in URCs, at least 25 per cent of their total Banking Outlets failing
which penal measures including restrictions on further expansion by such
banks will be considered and imposed, as deemed appropriate. With a view to
bring all entities on a level playing field, this dispensation is
applicable to all the existing banks that were NBFCs/MFI earlier as well as
NBFC/MFI entities that may apply for bank licence in future.
8. Manning of
Banks are allowed to set up
onsite/offsite Automated Teller Machines (ATMs) at centres/places
identified by them, including SEZs. Banks are permitted to post suitable
staff member(s) to provide guidance to the customers using the services of
these outlets. Such ATMs shall not be reckoned as ‘banking outlets’ as
defined in paragraph 3.1 of the circular.
9. Mobile Branches – Extension
to All Tiers
Banks are allowed to
open/operate mobile branches in all Centres. These mobile branches will not
be considered as Banking Outlets.
10. Setting up of Administrative
Offices, Back Offices (Central Processing Centres/Service Branches) and
Call Centres etc.
10.1 Banks having general
permission can set up Administrative Offices (Head/Regional/Zonal Offices
etc.), Training Centres, Back Offices (Central Processing Centres
(CPCs)/Service Branches), Treasury Branches and Call Centres, etc. without
prior permission from Reserve Bank of India.
10.2 The banks should ensure
that back offices i.e. CPCs/Service Branches which are set up exclusively
to attend to back office functions such as data processing, verification
and processing of documents, issuance of cheque books, etc. on requests
received from other branches should not have any direct interface with
customers for them to be not considered as banking outlets. Banks currently
having specific permission to allow customer interface at these back
offices (service branches and/or CPCs), have to align with the above
instructions within one year from the date of this circular and report
compliance to Department of Banking Regulation, Central Office, Reserve
Bank of India.
11. Business Facilitator/
Business Correspondent Model
The instructions on Business
Facilitator/Business Correspondent Model as contained in our Master
Circular DBOD.No.BAPD.BC.7/22.01.001/2014-15 dated July 01, 2014 remain
12. Customer Education
While the banks will continue to
follow guidelines as indicated in our Master Circular
DBOD.No.BAPD.BC.7/22.01.001/2014-15 dated July 01, 2014, they should also
ensure to enlighten people about banking outlets as adequate substitutes
for physical ‘brick and mortar’ branches in low population density or low
13. Role of Board of Directors
Financial inclusion being the
overarching objective of banking expansion and in view of the operational
flexibility being given to the banks, it is necessary that the Boards of
the Banks should ensure that arrangements are in place for strict
compliance with these guidelines, in letter and spirit. Banks are therefore,
advised to put in place a regular off-site and on-site monitoring system of
the ‘Banking Outlet’ to ensure proper supervision, ‘uninterrupted service’
and timely addressing of customer grievances. The Board shall regularly
review and monitor the transactions in these outlets to see that banking
services are being transacted in these outlets and more specifically the
target customers for financial inclusion are getting the banking facilities
in unbanked rural centres. As such, the Boards of banks should set internal
targets for financial inclusion. Data on centre-wise and tier-wise customer
accounts and transactions (Type and number of accounts, deposits received,
advances made, remittances processed, outstanding balances, etc.) shall be
captured on regular basis. As the Small Finance Banks and Payment Banks
have been set up to further financial inclusion and their client base would
primarily be migrant labour workforce, low income households, small
businesses, other unorganised sector entities, etc. their internal targets
should be in line with their objectives. The Board shall review the
progress in this regard on regular basis, say on quarterly basis and make
the required data available to Reserve Bank as and when required and called
14. Reporting Requirements
14.1 Banks shall furnish the
information as per Proforma I (Annex VI) on opening of new place of
business i.e. branch/office/NAIOs (Non Administratively Independent Office)
and Proforma II (Annex VII) on change in status – merger, conversion,
closure etc. to Department of Statistics and Information Management (DSIM),
Banking Statistics Division, Reserve Bank of India, Central Office, C-8/9,
Bandra-Kurla Complex, Mumbai-400051.
14.2 As regards fixed point BC
outlets classified as ‘banking outlets’, banks are required to report the
data as per Annex VIII on quarterly basis starting from April 01,
2017. In order to furnish the initial statistics, banks have to furnish the
first such report to DSIM, Reserve Bank of India (position as on March 31,
2017), not later one month from the date of issue of this Circular.
14.3 From the current year
2017-18, the annual reporting on opening of branches to the Department of
Banking Regulation, Central Office has been dispensed with.
15. All the salient changes made from the existing
branch authorization framework are furnished in the Appendix.
Guidelines on Authorisation of Banking Outlets – Major Changes
Banking Outlets/Other Outlets
Branch - A "branch" would include all branches
i.e. full-fledged branches, specialized branches, satellite offices,
mobile branches Extension Counters, off-site ATMs (Automated Teller
Machines), administrative offices, controlling offices, service branches
(back office or processing centre) etc. A call centre will not be treated
as a branch.
In place of branch, a banking
outlet (which includes a branch as well as BC outlet, amongst others) has
been defined as under:
Banking Outlet - A ‘Banking Outlet’ for
a DSCB, a Payment Bank or a SFB is a fixed point service delivery unit,
manned by either bank’s staff or its Business Correspondent where
services of acceptance of deposits, encashment of cheques / cash
withdrawal or lending of money are provided for a minimum of 4 hours per
day for at least five days a week.
Part time Banking Outlets -
Any fixed point service delivery unit of the bank which does not comply
with the prescription regarding minimum working hours/days will be
considered as a ‘Part-time Banking Outlet’.
Unbanked rural centre
Unbanked rural centres are
those which do not have any brick and mortar structure of a scheduled
commercial bank for customer based banking transactions.
An unbanked rural centre (URC)
is defined as a rural (Tier 5 and 6) centre that does not have a
CBS-enabled ‘Banking Outlet’ of a Scheduled Commercial Bank, a Payment
Bank or a SFB or a Regional Rural Bank nor a branch of a Local Area Bank
or licensed Co-operative Bank for carrying out customer based banking
Condition for opening of 25%
At least 25 percent of the
total number of branches opened during a financial year (excluding
entitlement for branches in Tier 1 centres given by way of incentive),
must be opened in unbanked rural (Tier 5 and Tier 6) centres.
At least 25 percent of the total
number of ‘Banking Outlets’ opened during a financial year must be opened
in an unbanked rural centres (Tier 5 and Tier 6).
Pro-rata benefit for part-time banking outlet will be given.
Restriction on Tier 1 Branches
removed simplifying the regulations obviating the need to give the lists
of underbanked districts/underbanked States.
The total number of branches
opened in Tier 1 centres during the financial year cannot exceed the
total number of branches opened in Tier 2 to Tier 6 centres and all
centres in the North Eastern States and Sikkim.
Banks may open branches in Tier 1 centres, [over and above their
eligibility above], equal to the number of branches opened in Tier 2 to
Tier 6 centres of underbanked districts of underbanked States,
Restriction on no. of Tier 1
Incentive for opening banking outlets in North Eastern States and Sikkim
(as well as LWE districts) has been modified as under :
The opening of a ‘Banking Outlet / part-time Banking Outlet’ in any Tier
3 to Tier 6 centre of North-Eastern States and Sikkim as well as in any
Tier 3 to 6 centres of LWE affected districts, notified by the Government
of India, will be considered as equivalent to opening a ‘Banking Outlet’/
‘part-time Banking Outlet’, as the case may be, in an URC.
A bank opening a ‘brick and mortar’ branch in a rural (Tier 5 and 6)
centre which – owing to the presence of a BC outlet by another bank - may
not be defined as an unbanked rural centre, will also be eligible for
same incentive. Similar treatment for opening a banking outlet in a rural
centre which is served only by a banking outlet of a Payment Bank.
Front loading of branches in
Unbanked Rural Centres – delinking from FIPs
The banks may consider
front-loading (prioritizing) the opening of branches in unbanked rural
centres over a 3 year cycle co-terminus with their Financial Inclusion
Plan (FIP 2013-16).
Banks may avail incentive for
front loading of ‘Banking Outlets’, if any, in excess of minimum 25 per
cent ‘Banking Outlets’ opened in the URCs/Tier 3 to 6 centres of N-E
States, Sikkim and LWE affected districts for a maximum period of next 2
Back Offices (CPCs/Service
Branches) - Customer Interface – No Interface allowed
Although current guidelines
prohibited any customer interaction, over time, some exceptions were
allowed based on banks’ requests which are not uniform in nature.
No Customer Interface will be
allowed. Banks which are currently having specific permission to allow
limited customer interface at CPCs will have to align with the above
instructions within one year from the date of this circular.
Guidelines on Satellite
Offices, Part Shifting of branches, Extension Counters, Ultra small
Branches, Specialised Branches subsumed.
Separate guidelines existed
for these outlets.
No separate guidelines
required as all these outlets will be considered as banking outlets or
part-time banking outlets, as the case may be.
Role of Board of Directors
Limited to approval of Annual
Branch Expansion Plans.
Financial Inclusion being the
overarching objective of the revised framework and the operational
flexibility being given to banks, the Board has been given overall
responsibility to ensure that all the guidelines are complied with.