RBI/2016-17/306 DBR.No.BAPD.BC.69/22.01.001/2016-17 May 18, 2017 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 Madam/Dear Sir, 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 effect. Yours faithfully (Saurav Sinha) Chief General Manager Encl: As above
Extract 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.
Annex Opening of new place of business and transfer of existing places of business (Section 23 of the Banking Regulation Act, 1949) Revised Guidelines 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. 3. Definitions The following definitions are to be used for the purpose of this policy framework: 3.1 Banking Outlet/Part-time Banking Outlet 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 ‘Banking Outlets’. 4. Opening of Banking Outlets – General Permission 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 below: 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 norm. 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 imposed. 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 allowed. 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 by them. 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. 5. Merger/Closure/ 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. 6. 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 IV. 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 ATMs/E-kiosks/CDMs/BNAMs 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 unchanged. 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 population locations. 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 for. 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.
Appendix Revised Guidelines on Authorisation of Banking Outlets – Major Changes Sr. No. | Particulars | Old Provisions | New Provisions | 1 | Banking Outlets/Other Outlets defined | 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’. | 2 | Unbanked rural centre redefined | 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
transactions. | 3 | Condition for opening of 25% branches modified | 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. | 4. | 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 branches removed.
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. | 5 | 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 years. | 6 | 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. | 7 | 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. | 8 | 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. | |