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1 ž ú ¹ { Ä ÿˆå RESERVE BANK OF INDIA RBI/ /77 DBOD. No. BAPD.BC. 7/ / July 1, 2014 All Commercial Banks (Excluding RRBs) Dear Sir/Madam, Section 23 of the Banking Regulation Act, 1949 Master Circular on Branch Authorisation Please refer to the Master Circular DBOD No. BAPD.BC. 18 / / dated July 1, 2013 consolidating instructions / guidelines issued to banks on Branch Authorisation till June 30, The Master Circular has been suitably updated by incorporating the instructions issued up to June 30, The Master Circular has been placed on the RBI website ( 2. Foreign banks may be guided by paragraph 3.3 of this Master Circular. Yours faithfully, (Lily Vadera) Chief General Manager Department of Banking Operations & Development,Central Office,Central Office Building, 13 th Floor,ShahidBhagat Singh Marg, Fort,Mumbai Phone : , Fax : , E mail : cgmicdbodco@rbi.org.in, Website : 1

2 TABLE OF CONTENTS Para No. Particulars Page No. A Purpose 4 B Classification 4 C Previous guidelines consolidated 4 D Scope of application 4 E Structure 4 1 Introduction 5 2 Definition 5 3 Branch Authorisation Policy 5 A Opening of branches 6 B Substitution of centres 16 C Shifting of branches 16 D Conversion of branches 19 E Merger of branches 20 F Closure of branches Setting up of Offsite/Mobile ATMs General Permission Mobile branches Setting up of central processing centres/back offices Call centres Business Facilitators / Business Correspondents Doorstep banking Acquisition of premises Population group wise classification of centres Reporting to Reserve Bank of India 34 Annex 1 Details of Branches opened under ABEP during the 35 financial year Annex 2 Details of tier-wise classification of centres based on 37 population Annex-3 List of Under banked Districts 38 2

3 Annex-4 List of Under banked Districts of Under banked States 44 Annex-5 Format for Proposals for shifting of branches 49 Annex-6 Format for Proposals for merger of branches 50 Annex-7 Format for Proposals for closure of branches 51 Annex-8 Reporting format for operationalization of off-site ATMs 52 by banks Annex-9 Proforma-I & Proforma-II 53 Annex-10 Proforma III and IV-Formats for reporting 78 operationalisation of mobile branches/offices/mobile ATMs Annex-11A Form VI form of application for permission to open a 79 new place of business Annex-11 B Summary of branches proposed to be opened 83 Annex-11 C State-wise, population group-wise number of existing 85 branches in under banked/other than under banked districts Annex-11 D State-wise, population group-wise number of existing 86 ATMs in under banked/other than under banked districts Annex-11 E State-wise, population group-wise number of existing 87 extension counters Annex-11 F Information about Specialised branches converted into 88 General branches and General branches converted into Specialised branches Annex-11 G Information to be submitted along with Annual Branch 89 Expansion Plan Annex-11 H Reporting format for opening of branches under general 93 permission in Tier 2 to Tier 6 centres Annex-11 I Particulars to be furnished by the bank in respect of its 94 request for an extension counter (E.C.) Appendix List of circulars consolidated in the master circular 98 3

4 Master Circular on Branch Authorisation A. Purpose To provide a framework of rules/regulations/procedures to be followed by banks while opening/shifting/closing branches in India in accordance with provisions of Section 23 of the Banking Regulation Act, B. Classification A statutory guideline issued by Reserve Bank of India. C. Previous Guidelines consolidated The Master Circular updates the instructions contained in the circulars listed in the Appendix. D. Scope of Application To all commercial banks (other than RRBs) including Local Area Banks. E. Structure 1. Introduction 2. Definition 3. Branch Authorisation Policy A. Opening of Branches B. Substitution of Centres C. Shifting of Branches D. Conversion of Branches E. Merger of Branches F. Closure of Branches 4.. Setting up of Off Site ATMs - General Permission 5.. Mobile Branches 6. Setting up of Central Processing Centres/Back Offices 7.. Call Centres 8.. Business Facilitator/Business Correspondent Model 9.. Door Step Banking 10.. Acquisition of premises 11.. Population Group wise classification of centres 12.. Reporting to Reserve Bank of India 4

5 1. Introduction The opening of new branches and shifting of existing branches of banks is governed by the provisions of Section 23 of the Banking Regulation Act, In terms of these provisions, banks cannot, without the prior approval of the Reserve Bank of India (RBI), open a new place of business in India or abroad or change, otherwise than within the same city, town or village, the location of the existing place of business. Section 23 (2) of the Banking Regulation Act lays down that before granting any permission under this section, the Reserve Bank may require to be satisfied, by an inspection under Section 35 or otherwise, as to the financial condition and history of the banking company, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location of the existing place of business. Commercial banks (other than RRBs) including Local Area Banks should approach the Department of Banking Operations & Development, Reserve Bank of India, Central Office (DBOD, CO) in this regard. The policy for authorisation of branches in India is summarized in the following paragraphs. 2. Definition For the purpose of branch authorisation policy, a "branch" would include all branches i.e full-fledged branches, specialised 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. A call centre is one, where only accounts or product information is provided to the customer through tele-banking facility and no banking transaction is undertaken through such centres. Also, no direct interface with clients/customers is permitted at call centres. 3. Branch Authorisation Policy With the objective of liberalising and rationalising authorisation of branches in India, a framework for a branch authorisation policy, which would be consistent with the medium term corporate strategy of banks and public interest, has been put in place. In addition to the requirement relating to the financial condition and history of the banking company, the general character of its management, and the adequacy of its 5

6 capital structure and earning prospects, the branch authorisation policy framework would have the elements enumerated in the following paragraphs. A. Opening of Branches 3.1 Domestic scheduled commercial banks (other than RRBs) are, with effect from September 19, 2013, permitted to open branches in Tier 1 to Tier 6 centres without having the need to take permission from Reserve Bank of India in each case, subject to certain conditions. The guidelines for authorisation (opening) of branches of domestic scheduled commercial banks in India are given as under: i) The branch authorisation policy covers the opening of branches in all Tiers (Tier 1 to 6) of the country. The Tier wise population group is as per Annex 2. It may be seen therein that Tier 1 comprises metropolitan and urban centres, Tiers 2, 3, and 4 comprise semi-urban centres and Tiers 5 and 6 comprise rural centres. ii) For the purposes of ensuring more uniform spatial distribution, banks are encouraged to open branches in underbanked centres, more precisely, in underbanked districts of underbanked States. An underbanked centre (whether a district or State) would be one where the Average Population Per Branch Office (APPBO) is more than the national average. Thus, though there are bank branches in these centres, there are not as many branches as would be desirable. While no mandatory number of branches have been prescribed to be opened in such centres, banks are incentivised for opening branches in such centres as detailed in paragraph 3.1 (vii) below. A list of underbanked districts of underbanked States is as per Annex 4. iii) For increasing banking penetration and financial inclusion, there is a need to open branches in centres that are unbanked. Unbanked centres are those which do not have any brick and mortar structure of a scheduled commercial bank for customer based banking transactions. Therefore, the current branch authorisation policy mandates that banks have to open at least 25 percent of all branches opened in a year in unbanked rural centres, as detailed in paragraph (vi) (a) below. iv) The general permission available for opening of branches by domestic scheduled commercial banks in Tier 1 to Tier 6 centres across the country will encompass specialised branches, extension counters, satellite offices, service branches, Central Processing Centres (CPCs) and all other offices/branches of the bank. Thus, banks 6

7 are not required to approach RBI for authorisation for opening branches or any other places of business or administrative offices in any centre. v) Banks may formulate an annual plan for the financial year, approved by the Board of the bank as part of their annual strategy for branch expansion. While formulating this plan, they may keep various factors in mind such as setting up of low cost branches, innovative use of technology, including internet banking and virtual banking to reduce physical footfalls, improving customer service, etc. vi) The opening of branches during a financial year will be subject to the conditions given below. Extension counters, satellite offices, mobile branches, CPCs, service branches and administrative offices can be freely opened in any centre and will not be reckoned for the purposes of paras (a) and (b) below. a) 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 as stated in para 10 below), must be opened in unbanked rural (Tier 5 and Tier 6) centres, i.e, centres which do not have a brick and mortar structure of any scheduled commercial bank for customer based banking transactions. b) The total number of branches opened in Tier 1 centres during the financial year (excluding entitlement for branches in Tier 1 centres given by way of incentive as stated in para 10 below) 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. vii) Since there is a continuing need for opening more branches in underbanked districts of underbanked States for ensuring more uniform spatial distribution, banks would be provided incentive for opening such branches. Accordingly, banks may open branches in Tier 1 centres, [over and above their eligibility as defined at para (vi) (a) and (b) above], equal to the number of branches opened in Tier 2 to Tier 6 centres of underbanked districts of underbanked States, excluding such of the branches opened in unbanked rural centres that are located in the underbanked districts of underbanked States. viii) Banks have to ensure that all branches opened during a financial year are in compliance with the norms as stipulated above. In case a bank is unable to open all 7

8 the branches it is eligible for in Tier 1 centres, as per paragraph (vi) and (vii) above, it may carry-over (open) these branches during subsequent two years. ix) Banks, which for some reason are unable to meet their obligations of opening branches in Tier 2 to 6 centres in aggregate, or in unbanked rural centres (Tiers 5 to 6 centres) during the financial year, must necessarily rectify the shortfall in the next financial year. x) Banks were advised vide circular DBOD. No. BAPD.BC. 97/ / dated May 28, 2013, that they may consider front-loading (prioritising) the opening of branches in unbanked rural centres over a 3 year cycle co-terminus with their Financial Inclusion Plan (FIP ). Therefore, credit will continue to be given for the branches opened in unbanked rural centres in excess of the required 25 percent of the total branches opened during the year which will be carried forward for achieving the criteria in the subsequent year of the FIP. xi) Where the banks do not find it viable to open branches in rural areas, they may open Satellite Offices. The following guidelines may be followed by the banks for establishing Satellite Offices: a. The Satellite Offices should be established at fixed premises in the surrounding villages and should be controlled and operated from a base branch located at a Central Village/Block Head Quarters. b. Each Satellite Office should function on a few specified days (at least twice) in a week at specified hours. c. All types of banking transactions may be conducted at these offices. d. The customers of the Satellite Offices may be permitted to transact business at the base branch on non-operating days of such offices. e. While separate ledgers/registers/scrolls may be maintained for each Satellite Office, all the transactions carried out at these offices should be incorporated in the books of account of the base branch. f. The staff attached to the base branch, preferably consisting of a member of supervisory staff, a cashier-cum-clerk and an armed guard, may be deputed to the Satellite Offices. g. Adequate arrangements for insurance of furniture, cash-in-transit, etc. may be made. 8

9 xii) Banks can open Extension Counters at the premises of the institutions of which they are the principal bankers. Extension Counters can be opened within the premises of big offices/factories, hospitals, military units, educational institutions, etc. where there is a large complement of staff/workers, students, who because of their identical working hours and non-availability of banking facilities at a reasonable distance find it difficult to carry out their banking transactions. The Extension Counters should carry out limited type of banking business, such as, Deposit/withdrawal transactions, Issuing and encashment of drafts and mail transfers, Issue and encashment of travellers cheques, Sale of gift cheques, Collection of bills, Advances against fixed deposits of their customers (within the sanctioning power of the officials concerned at the Extension Counter), Facility of safe deposit locker (provided adequate security arrangements are made). Depository services to its customers provided the bank is registered with SEBI as Depository Participant. EC should not extend credit facility against pledge of dematerialised securities or facilitate Securities Lending and Borrowing thereat. Further, if the Extension Counter proposes to undertake government business it would require prior approval of Government authority concerned as also of Department of Government & Bank Accounts, Reserve Bank of India, Central Office. Extension Counters are not allowed to be opened at residential colonies, shopping complexes, market places and places of worship, etc. xiii) An annual report of branches actually opened during the year, for the year ending March 31, should be placed before the bank s Board and forwarded to the Department of Banking Operations and Development, Reserve Bank of India, Central Office, (DBOD, CO), Shahid Bhagat Singh Marg, Mumbai , latest by June 30 of that year in the format given in Annex 1. Compliance regarding opening of branches in accordance with the above stipulations would also be examined during the Annual Financial Inspection of the bank and discussion of the Financial Inclusion Plans. 9

10 xiv)the general permission referred to above would be subject to the parameters stated in paragraph vi and vii above as well as regulatory/supervisory comfort in respect of the individual banks. RBI would have the option to withhold the general permission being granted to banks which fail to meet the above mentioned criteria along with imposing penal measures on banks which fail to meet the obligations at paras vi and ix above. 3.2 Domestic Scheduled Commercial Banks from whom general permission has been withdrawn as well as Local Area Banks (LABs) will, as hitherto, continue to obtain prior approval of DBOD,CO, RBI before opening a new branch / office by submitting their application in Form VI given in Annex 11A on an annual basis. i) The Annual Branch Expansion Plan (ABEP) with the consolidated details regarding proposals for opening, closing, shifting, merger and conversion of all category of branches where prior permission of RBI is required in terms of the extant instructions along with the summary of branches, proposed to be opened may be submitted as per Proforma given in Annex 11 B. Along with this, information sought in Annex 11 (C, D, E, F & G) should also be furnished. 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 Department of Banking Operations and Development (DBOD), Reserve Bank of India, Central Office, Mumbai for approval. The Proforma of Form VI is given in Annex-11 A. Form VI is not required to be submitted in respect of Credit Card Centres and Back Offices/Processing Centres. ii) Banks are free to submit their ABEP any time during the year. It is not linked either to the financial year or calendar year. Notwithstanding the above, banks may approach RBI for any urgent proposals regarding opening of branches, especially in under banked areas (districts) anytime during the year, in addition to the authorizations granted under the ABEP, which would be considered on merit. As the concept of the ABEP was introduced to enable banks to plan their branch expansion as part of a medium term strategy, it is not expected that such proposals will be made frequently. 10

11 iii)the ABEP 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 may ensure that an authenticated / certified copy of such approval is invariably submitted along with these proposals. iv) The validity of the authorisation granted would be one year from the date of the issue of the letter of authorisation/permission. Generally, no extension in validity period of the authorisation would be allowed. However, in case a bank is unable to open a particular branch due to genuine reasons during the validity period of one year, they may approach the Regional Office concerned of Department of Banking Supervision (DBS), Reserve Bank of India or the Department of Banking Operations and Development, Central Office, Reserve Bank of India, Mumbai (DBOD, CO), (in respect of branches in Maharashtra & Goa), before expiry of validity period of authorisation for extension of time for a further period not exceeding one year. At centres where a bank fails to open a branch within the validity period of the authorisation i.e. one year (or within the extended time of another year, as the case may be), the permission granted would automatically lapse and if a bank is still interested in opening the branch at that centre, they should include it as a fresh proposal in the next ABEP. v) As regards the public interest dimensions of the policy framework, the following aspects would be kept in view while processing branch authorisation requests: a) The RBI will, while considering applications for opening branches, give weight-age to the nature and scope of banking facilities provided by banks to common persons, particularly in under banked areas (districts), actual credit flow to the priority sector, pricing of products and overall efforts for promoting financial inclusion, including introduction of appropriate new products and the enhanced use of technology for delivery of banking services. b) Such an assessment will include the policy of the bank on minimum balance requirements and whether depositors have access to minimum banking or "no frills" banking services, commitment to basic banking activity, viz. acceptance of deposits and provision of credit and quality of 11

12 customer service as, inter alia, evidenced by the number of complaints received and the redressal mechanism in place in the bank for the purpose. c) The need to induce enhanced competition in the banking sector at various locations. d) Regulatory comfort will also be relevant in this regard. This would encompass: 1. Compliance with not only the letter of the regulations but also whether the bank's activities are in compliance with the spirit and underlying principles of the regulations. 2. The activities of the banking group and the nature of relationship of the bank with its subsidiaries, affiliates and associates. 3. Quality of corporate governance, proper risk management systems and internal control mechanism. vi) As regards the procedural aspects, the existing system of granting authorisations for opening individual branches from time to time has been replaced by a system of giving aggregated approvals, on an annual basis. The medium term framework and the specific proposals would cover the opening, closing, shifting, merger and conversion of all categories of branches. vii) In terms of the existing branch authorisation policy, banks will not be required to approach the Regional Offices concerned of Reserve Bank of India for "licence" for opening branches. viii) Domestic Scheduled Commercial Banks that have to seek prior permission for opening branches, while preparing their Annual Branch Expansion Plan (ABEP), should allocate at least 25 percent of the total number of branches proposed to be opened during a year in unbanked rural (Tier 5 and Tier 6) centres. An unbanked rural centre would mean a rural (Tier 5 and Tier 6) centre that does not have a brick and mortar structure of any scheduled commercial bank for customer based banking transactions. ix) In view of the requirement for opening at least 25 per cent of the branches under ABEP in unbanked rural centres, for each branch proposed to be opened in Tier 2 to Tier 6 centres of under banked districts of under banked States, excluding such of 12

13 the rural branches proposed to be opened in unbanked rural centres that may be located in the under banked districts of under banked States in compliance with the requirement as indicated in sub para vii above, authorisation will be given for opening of a branch in a Tier 1 centre. This will be in addition to the authorisation given for branches in Tier 1 centres based on the considerations stated above. x) Banks may consider front-loading (prioritising) the opening of branches in unbanked rural centres over a 3 year cycle co-terminus with their Financial Inclusion Plan ( ). Credit will be given for the branches opened in unbanked rural centres in excess of the required 25 percent of the ABEP for the year which will be carried forward for achieving the criteria in the subsequent ABEP / year of the Financial Inclusion Plan (FIP). xi) Proposals for opening of Specialised Branches in Tier 1 centres may also be submitted along with the ABEP. xii) Where the banks do not find it viable to open branches in rural areas, they may open Satellite Offices. The application for opening of the Satellite Office along with relative Board approval should be included in the ABEP. The following guidelines may be followed by the banks for establishing Satellite Offices: a. The Satellite Offices should be established at fixed premises in the surrounding villages and should be controlled and operated from a base branch located at a Central Village/Block Head Quarters. b. Each Satellite Office should function on a few specified days (at least twice) in a week at specified hours. c. All types of banking transactions may be conducted at these offices. d. The customers of the Satellite Offices may be permitted to transact business at the base branch on non-operating days of such offices. e. While separate ledgers/registers/scrolls may be maintained for each Satellite Office, all the transactions carried out at these offices should be incorporated in the books of account of the base branch. f. The staff attached to the base branch, preferably consisting of a member of supervisory staff, a cashier-cum-clerk and an armed guard, may be deputed to the Satellite Offices. 13

14 g. Adequate arrangements for insurance of furniture, cash-in-transit, etc. may be made. xiii) Banks desirous of setting up Extension Counters may approach DBOD CO with application in original (as given in Annex 11I) complete in all respects, along with a certified copy of the approval by the competent authority. Banks can open Extension Counters at the premises of the institutions of which they are the principal bankers after obtaining authorisation from DBOD, CO, Mumbai for the purpose. Extension Counters can be opened within the premises of big offices/factories, hospitals, military units, educational institutions, etc. where there is a large complement of staff/workers, students, who because of their identical working hours and nonavailability of banking facilities at a reasonable distance find it difficult to carry out their banking transactions. The Extension Counters should carry out limited type of banking business, such as deposit/withdrawal transactions, issuing and encashment of drafts and mail transfers, issue and encashment of travellers cheques, sale of gift cheques, collection of bills, advances against fixed deposits of their customers (within the sanctioning power of the officials concerned at the Extension Counter), facility of safe deposit locker (provided adequate security arrangements are made), depository services to its customers provided the bank is registered with SEBI as Depository Participant. The Extension Count (EC) should not extend credit facility against pledge of dematerialised securities or facilitate Securities Lending and Borrowing thereat. Further, if the EC proposes to undertake government business it would require prior approval of Government authority concerned as also of Department of Government & Bank Accounts, Reserve Bank of India, Central Office. Extension Counters are not allowed to be opened at residential colonies, shopping complexes, market places and places of worship, etc. xiv) Authorisation for opening branches in Tier 1 centres will not generally exceed the total number of branches proposed to be opened in Tier 2 to Tier 6 centres as well as in the rural, semi-urban and urban centres in the North-Eastern States and Sikkim. While issuing such authorisation, Reserve Bank of India will factor in whether at least 25 percent of the total number of branches to be opened during a year, are proposed to be opened in unbanked rural centres. 14

15 xv) The number of branches, which would be authorized by the Reserve Bank based on applications for branches to be opened in Tier 1 centres, would also depend upon a critical assessment of the bank's performance in financial inclusion, priority sector lending, customer service, etc Foreign Banks The general permission granted to domestic scheduled commercial banks vide paragraph 3.1 above for opening branches in India will not be applicable to foreign banks. The Branch Authorisation Policy would be applicable to foreign banks, subject to the following : i) Foreign banks are required to bring an assigned capital of US$25 million upfront at the time of opening the first branch in India. ii) Existing foreign banks having only one branch would have to comply with the above requirement before their request for opening of second branch is considered. iii) Foreign banks will be required to submit their branch expansion plan on an annual basis. iv) In addition to the parameters laid down for Indian banks, the following parameters would also be considered : a) Foreign bank and its groups track record of compliance and functioning in the global markets would be considered. Reports from home country supervisors will be sought, wherever necessary. b) Weightage would be given to even distribution of home countries of foreign banks having presence in India. c) The treatment extended to Indian banks in the home country of the applicant foreign bank would be considered. d) Due consideration would be given to the bilateral and diplomatic relations between India and the home country. e) The branch expansion of foreign banks would be considered keeping in view India's commitments at W.T.O. ATMs would not be included in the number of branches for such computation. 15

16 Accordingly, foreign banks should submit their ABEP to the Reserve Bank of India, DBOD, International Banking Division, Central Office, Central Office Building (13 th floor), Shahid Bhagat Singh Marg, Mumbai B. Substitution of Centres i) In view of the general permission to Domestic Scheduled Commercial for opening branches in Tier 1 to Tier 6 centres, any proposals for substitution of centres would be subject to the approval of the Board of banks. However, it should be ensured that the guidelines in paragraph 3.1 above are adhered to while carrying out substitution of centres. ii) Domestic Scheduled Commercial Banks that have to seek prior permission for opening branches as well as Local Area Banks (LABs) should make proper assessment while finalising the centre/place for opening of a branch keeping in view the business potential for opening of the branch thereat. Normally substitution of centres would not be allowed. However, under exceptional circumstances, if banks are unable to open branch at the proposed centre due to genuine problem, banks should approach DBOD, CO along with reasons thereof. The bank should submit Form VI in respect of the new centre. All such requests will be examined on a caseto-case basis. iii) Substitution of centres would be allowed to centres of a similar population group or to a lower population group provided banks undertake to open the branch within the period of validity of authorisation issued. Further, the substitution would not be allowed from a centre in an under banked district to a centre in other than an under banked district. C. Shifting of Branches i) General a) Shifting of branches should be part of the medium term corporate strategy of branch expansion. Accordingly, proposals requiring approval of RBI should be submitted to DBOD,CO, RBI as per Proforma given in Annex 5. b) Banks should, however, ensure that customers of the branch, which is being shifted, are informed well in time before actual shifting of the branch, so as to avoid inconvenience to them. 16

17 c) The details of shifting (i.e. new address, date of shifting, etc.) should be reported to Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra and Goa) immediately after shifting the branch, and in any case not later than two weeks after the shifting. No amendment in licence would be required in such cases. d) The shifting of branches should also meet the following minimum criteria: 1. The new centre is of the same or lower population group as the existing centre, e.g. a branch at a rural centre can be shifted to another rural centre only; and 2. A branch located in an under banked district can be shifted to another centre in an under banked district only. e) In terms of the mail box clarification issued dated June 17, 2014, foreign banks in India have to seek prior permission of DBOD, International Banking Division, Central Office, for the purpose of shifting of their branches from one centre to another. ii) Shifting within the Centre (City/Town/Village) Banks have been given freedom to shift a branch to any location within the centre (city/town/village) without seeking prior approval from RBI. iii) Rural Branches a) Within the block 1. As a matter of policy, shifting of sole rural branch outside the centre/village is not permitted, as such shifting would render the centre unbanked. However, under exceptional/unforeseen circumstances (natural calamity, adverse law and order conditions, etc.) if the bank is proposing to shift any sole rural branch outside the centre, District Consultative Committee (DCC) approval should be obtained and proposal thereof should be submitted to DBOD,CO, RBI for consideration. 2. Banks are however; free to shift their rural branches within the block, from centres which are served by more than one branch of a commercial bank, without obtaining prior approval of RBI. While considering shifting of branches, banks should keep in mind the role entrusted to these branches under the Government sponsored programmes. 17

18 b) Outside the Block Requests for shifting of branches from centres, which are served by more than one commercial bank branch (excluding Regional Rural Bank branch) outside the block should be submitted to DBOD,CO, RBI for approval and the same will be considered based on the following parameters: 1. Branches being shifted are in existence for five years or more and are incurring losses consecutively for the last three years; 2. Branches located at centres prone to certain natural risks such as, floods, landslides or likely to be submerged due to construction of dams or affected by any natural calamities, etc.; 3. Branches functioning in places where law and order problem, insurgency or terrorist activities pose threat to bank personnel and property; 4. Branches where the premises occupied by the bank are in a dilapidated condition or burnt/destroyed and no suitable premises are available at the centre etc. iv) Metropolitan, Urban and Semi Urban Branches a) The banks may at their discretion shift their branches in metropolitan/urban/semi urban centres within the municipal revenue limit of that centre i.e. city/town without prior approval from RBI. b) Banks may also shift their branches in metropolitan/urban/semi-urban centres within the same State (except single semi-urban branches as such shifting would render the semi urban centre unbanked) subject to the minimum criteria stated in paragraph C(i) (d) -.above. v) Part-shifting of Branches Banks will have to approach Reserve Bank of India, Central Office, DBOD, Branch Authorisation and Policy Division (BAPD) for domestic banks and International Banking Division (IBD) for foreign banks) for approval for shifting of some activities/part-shifting of the branch. Part shifting of the branches will be considered by RBI on a case-to-case basis, subject to the following norms:- a) No part shifting would be considered within three years of opening of a branch. b) Part shifting of only one branch per Metropolitan centre/state Capital would be permitted for each bank in a calendar year. 18

19 c) The new location for part shifting should be within 250 meters of the existing location. d) For a single branch, only one part shifting will be permitted. Once a branch has been allowed part shifting, the new location as well as the existing location will not be eligible for further part shifting. e) To qualify for part-shifting, the area of the new location/premises should not be more than the area of the existing location. f) The same activity cannot be carried out at both the locations/premises. D. Conversion of Branches i) Conversion of Specialised Branch Banks may convert a specialized branch into another category of specialized branch or a general banking branch at their discretion. However, it may be ensured that details thereof are advised to the Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra and Goa) immediately after the conversion of the branch, and in any case not later than two weeks after conversion. No amendment to licence/authorization would be required. ii) Conversion of General Banking Branches to any type of Specialized Branch Banks are free to convert their general banking branches into specialised branches subject to the condition that the bank should continue to serve the existing customers of the general banking branches, which are being converted into specialized branches. However, it may be ensured that details thereof are advised to Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra & Goa) immediately after the conversion of the branch, and in any case not later than two weeks after conversion. No amendment to the licence/authorization would be required. iii) Upgradation of Extension Counters and Satellite Offices into Full-fledged Branches a) Banks are free to convert their existing Extension Counters (ECs) and Satellite Offices (SO) into full-fledged branches at their discretion and relocate them within that centre. However, banks should surrender the licences (if separate licence has been issued) of Extension Counters/Satellite Office and obtain a permission letter for 19

20 full-fledged branch before effecting Upgradation, from Regional Office concerned of DBS or DBOD, CO (in respect of ECs/SOs in Maharashtra & Goa). b) In cases where banks desire to upgrade their existing Extension Counters and Satellite Offices into full-fledged branches and relocate the same to another centre, the same may be carried out subject to the approval of their Boards and the conditions mentioned in paragraph 3.1(vi). - Banks not having general permission should continue to submit such proposals to DBOD, CO for approval. iv) Conversion of Rural Branch into Satellite Office Conversion of a rural branch into satellite office is generally not favoured. However, in exceptional circumstances, such proposals may be considered. The proposals for conversion of rural branches into satellite offices should be submitted to DBOD,CO, RBI after obtaining approval from the District Consultative Committee (DCC) for our consideration. E. Merger of Branches i) General a) Banks should, ensure that customers of the branch, which is being merged (transferor branch) are informed well in time before actual merging of the branch so as to avoid inconvenience to them. b) The details of merger (date of merger, etc.) should be reported to the Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra and Goa) immediately after merger of the branch, and in any case not later than two weeks after the merger. c) After merger, the licence (if separate licence has been issued) of the merged branch (transferor branch) should be surrendered to Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra & Goa) for cancellation. d) Where a consolidated authorization has been issued for more than one branch, it would suffice, if the bank reports the merger of the particular branch (clearly mentioning the Sl. No. of the Annex to the letter of authorisation issued in respect of the branch) to Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra and Goa). 20

21 ii) Merger of Sole Rural/Semi Urban Branch As a matter of policy, merger of a sole rural branch/semi-urban branch is not permitted, as merging the same with a branch outside the centre would render the centre unbanked. However, under exceptional/unforeseen circumstances (natural calamity, adverse law and order condition, etc.), if the bank is compelled to merge any sole rural/semi urban branch, DCC approval should be obtained and proposal thereof should be included in the annual plan for our consideration. Details of such proposals for rural and semi urban branches are required to be furnished to us for our approval as per Proforma in Annex 6. iii) Merger of Metropolitan, Urban and Semi Urban Branches Banks may merge one branch with another branch at Metropolitan, Urban and Semiurban centres (not assigned any responsibility under Government sponsored programme), without seeking prior approval from RBI. As such, these proposals should not be included in the ABEP for our approval. F. Closure of Branches i) General a) Banks should, ensure that customers of the branch, which is being closed, are informed well in time before actual closure of the branch, so as to avoid inconvenience to them. b) The details of closure (i.e. date of closure, etc.) should be reported to the Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra and Goa) immediately after closure of the branch, and in any case not later than two weeks after closure. c) After closure, the licence/authorisation (if a separate licence/authorisation has been issued for a single branch) of the branch should be surrendered to Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra & Goa) for cancellation. Where a consolidated authorization has been issued for more than one branch, it would suffice if the bank reports the closure of the particular branch (clearly mentioning the Sl. No. of the Annex to the letter of authorisation issued in respect of the branch) to the Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra and Goa). 21

22 ii) Closure of Rural Branches As a matter of policy, closure of even loss making branches at rural centres having a single commercial bank branch (excluding Regional Rural Bank branch) is not permitted, as closure would render the centre unbanked. The proposal for closure of a rural branch at a centre served by more than one commercial bank branch should be included in the ABEP after obtaining approval of District Consultative Committee (DCC). Details of such proposals are required to be furnished to us for Reserve Bank of India approval as per Proforma given in Annex 7. iii) Metropolitan, Urban and Semi Urban Branches Banks are permitted to close any branch in metropolitan, urban and semi-urban centres (not assigned any responsibility under Government sponsored programme) centres without seeking prior approval from RBI. As such, these proposals should not be included in the ABEP for our approval. 4. Setting up of Off-site/Mobile ATMs - General Permission i) Scheduled Commercial Banks are permitted to install Off-site/Mobile ATMs at centres/places identified by them, including SEZs without permission from the Reserve Bank subject to the following conditions: a. The business transacted at the Off-site ATM shall be recorded in the books of the respective branch/ base branch / Centralized Data Centre. b. No person other than the security guard should be posted at such Off Site ATM centre. c. Bank should make adequate stand-by arrangements for meeting the cash requirements of the ATM. d. The bank should ensure that only properly sorted and examined notes are put into circulation through the ATM. e. Third party advertisement on the ATM screens/network, such as display of products of other manufacturers /dealers /vendors is not permitted. However, there is no objection to banks utilizing the ATM screens for displaying their own products. The ATMs installed in SEZs should deal in Indian Rupee only. 22

23 This would, however, be subject to any direction which the Reserve Bank may issue, including for closure/shifting of any such Off-site/ Mobile ATMs, wherever so considered necessary by the Reserve Bank. The banks should report full details of the Off-site/Mobile ATMs installed by them in terms of the general permission to Regional Office concerned of DBS or DBOD, CO (in respect of Off-Site/Mobile ATMs in Maharashtra and Goa) immediately after operationalisation and in any case not later than two weeks, as per the format enclosed (Annex 8 and Annex 10 ). ii) The facilities which can be provided by banks through ATMs are as under: a. Deposits/Withdrawals; b. Personal Identification Number (PIN) changes; c. Requisition for cheque books; d. Statement of accounts; e. Balance enquiry; f. Inter account transfer within the bank between accounts of same customer or different customers of the bank at the same centre or different centres within the country; g. Inter Bank Funds Transfer - Transfer of Funds between the bank's customers and customers of other banks; h. Mail facility for sending written communication to the bank ; i. Utility payments like Electricity bill, Telephone bill, etc.; j. Issue of railway tickets and k. Product Information 5. Mobile Branches The scheme of mobile branch envisages extention of banking facilities through a well protected van with arrangements for two or three officials of the bank sitting in it with books, safe containing cash, etc. The mobile unit would visit the places proposed to be served by it on specific days/hours. Domestic scheduled commercial banks (other than RRBs) are permitted to open Mobile branches in Tier 3 to Tier 6 centres, as also in rural, semi-urban and urban centres in North Eastern States and Sikkim without permission from Reserve Bank of India in each case, subject to reporting as per the format enclosed (Annex 9 ). The mobile branch should not visit villages/centres which are served by co-operative banks and places served by 23

24 regular branch of commercial banks. The mobile branch should be stationed in each village/ location for a reasonable time on specified days and specified hours, so that its services could be utilized properly by customers. The business transacted at the mobile branch shall be recorded in the books of the base branch/data centre. The bank may give wide publicity about the mobile branch in the village, including details of "specified days and working hours" at various locations so as to avoid any confusion to local customers, and any change in this regard should also be publicized. In order to inform public/customers, arrangement should be made to display these details in the areas serviced by the mobile branch. 6. Setting up of Central Processing Centres/Back Offices Banks may also set up Central Processing Centres (CPCs) / Back Offices exclusively to attend to back office functions such as data processing, verification and processing of documents, issuance of cheque books, demand drafts etc. on requests received from other branches and other functions incidental to banking business. These CPCs/Back Offices should have no direct interface with customers. These CPCs/Back Offices would be termed as Service Branches and would not be allowed to be converted into General Banking Branches. Banks are permitted to open Central Processing Centres (CPCs)/Service branches in without prior permission from Reserve Bank of India in each case, subject to reporting as per the format enclosed (Annex 11 H). The proposals for opening of CPCs/Back Offices in centres where authorisation is required from the Reserve Bank (commercial banks covered under paragraph 3.2 and 3.3) should be included in the ABEP and submitted for approval to RBI. 7. Call Centres As no banking transaction is undertaken at a call centre, no permission is required for establishment of a "call centre" as defined in paragraph 2. However, details of opening, closure and shifting of call centres should be reported to RBI as provided in paragraph Business Facilitator/ Business Correspondent Model With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector, scheduled commercial banks including Regional Rural Banks (RRBs) and Local Area Banks (LABs) have been permitted to use the services of 24

25 intermediaries in providing financial and banking services through the use of Business Facilitator/ Business Correspondent Model as per the guidelines issued in this regard. i) Guidelines for Engaging Business Facilitator Under the "Business Facilitator" model, banks may use the services of intermediaries such as: a) NGOs/SHGs b) Farmers Clubs c) Cooperatives d) Community based organizations e) IT enabled rural outlets of corporate entities f) Post Offices g) Insurance agents h) Well functioning Panchayats i) Village Knowledge Centres j) Agri Clinics k) Agri Business Centres l) Krishi Vigyan Kendras m) KVIC/KVIB units, Depending on the comfort level of the bank for providing facilitation services. Such services may include (i) identification of borrowers and fitment of activities; (ii) collection and preliminary processing of loan applications including verification of primary information/data; (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling; (iv) processing and submission of applications to banks; (v) promotion and nurturing Self Help Groups/Joint Liability Groups; (vi) post-sanction monitoring; (vii) monitoring and handholding of Self Help Groups/Joint Liability Groups/Credit Groups/others; and (viii) follow-up for recovery. ii) Guidelines for engaging Business Correspondents (BCs) The scheduled commercial banks including Regional Rural Banks (RRBs) and Local Area Banks (LABs) may engage Business Correspondents (BCs), subject to 25

26 compliance with the following guidelines. Banks may formulate a policy for engaging Business Correspondents (BCs) with the approval of their Board of Directors. Due diligence may be carried out on the individuals / entities to be engaged as BCs prior to their engagement. The due diligence exercise may, inter alia, cover aspects such as (i) reputation/market standing, (ii) financial soundness, (iii) management and corporate governance, (iv) cash handling ability and (v) ability to implement technology solutions in rendering financial services. A. Eligible individuals/entities The banks may engage the following individuals/entities as BC: i) Individuals like retired bank employees, retired teachers, retired government employees and ex-servicemen, individual owners of kirana/medical / Fair Price shops, individual Public Call Office (PCO) operators, agents of Small Savings schemes of Government of India/Insurance Companies, individuals who own Petrol Pumps, authorized functionaries of well-run Self Help Groups (SHGs) which are linked to banks, any other individual including those operating Common Service Centres (CSCs); ii) NGOs/ MFIs set up under Societies/ Trust Acts and Section 25 Companies; iii) Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/ Cooperative Societies Acts of States/Multi State Cooperative Societies Act; iv) Post Offices; and v) Companies registered under the Indian Companies Act, 1956 with large and widespread retail outlets, other than Non Banking Financial Companies (NBFCs). vi) In view of the general permission given to domestic scheduled commercial banks (excluding RRBs) to open branches in Tier 1 to Tier 6 centres, they may engage non-deposit taking NBFCs (NBFCs-ND) as BCs, subject to the following conditions: a. It should be ensured that there is no comingling of bank funds and those of the NBFC-ND appointed as BC. b. There should be a specific contractual arrangement between the bank and the NBFC-ND to ensure that all possible conflicts of interest are adequately taken care of. c. Banks should ensure that the NBFC-ND does not adopt any restrictive practice such as offering savings or remittance functions only to its own 26