BRANCH LICENSING – RRBs
It is mandatory for Regional Rural Banks to seek prior approval/licence from Rural Planning & Credit Department (RPCD), RBI, before opening of new branches/offices.
RRBs, upon obtaining prior approval of their Boards, are required to submit their proposal for opening/merger or conversion of branches/offices, etc. to the Regional Office of NABARD with an advance copy to RBI. The Empowered Committee (EC) for RRBs at Regional Offices of RBI, upon scrutiny/deliberation, makes recommendation and RBI would dispose of such applications expeditiously.
Separate approval of sponsor bank or sub-group of District Consultative Committee (DCC) is not required for opening of branches.
Eligibility (Opening of new branches)
a) No default in maintenance of SLR and CRR during the last two years.
b) Making operational profits
c) Net Worth shows improvement
d) Net NPA ratio does not exceed 8%.
Relaxation in branch licensing policy
RRBs complying with the following criteria are permitted to open branches in Tier 3 to Tier 6 centers (with population up to 49,999 as per Census 2001) without RBI permission in each case subject to reporting.
a) CRAR of at least 9%.
b) Net NPA less than 5%.
c) No default in CRR/SLR for the last year.
d) Net Profit in the last financial year.
e) CBS compliant.
Opening of branches/Regional Offices
RRBs can identify Rural Centers (population up to ten thousand), Semi-urban centers (ten thousand to one lakh), and urban centers (one lakh to ten lakh), and metropolitan centers (above ten lakh) depending upon the business potentiality and profitability, etc. Proposals for opening of branches would be considered by RBI based on the quality of its management, efficacy of the internal control system, profitability and other relevant factors.
RBI permits RRBs for setting up of its Service Branches / Central Processing Centres (CPCs) / Back Offices exclusively to attend to back office functions without any interface with customers.
RRBs (both amalgamated and stand alone) are required to obtain Licences from RBI for setting up of Regional Office for every 50 branches (Below 50 branches under HO control). The ROs are not permitted to transact any banking business. They can either shift/merge/close these offices without any approval but are required to get the address changed/surrender the licence as the case may be.
Prior to issuance of Licence, authorization is issued for opening of branches based on the request received through NABARD. The authorization is valid for 2 years. RRBs have to obtain licence within the period upon putting the adequate infrastructure for the branch. Alteration of name of any branch, RBI permission is to be obtained.
If any branch proposes to undertake government business, it would require prior approval from the concerned Government authority and RBI.
Shifting of Branches
Conversion of branches into satellite/mobile offices
Opening of Extension Counters
Upgradation of Extension Counters
For upgrading Extension Counters into full fledged branches, RBI permission is to be obtained which would be considered by RBI if certain conditions are fulfilled viz. functioning for a minimum period of 5 years, number of deposit accounts exceeded 2000 during last one year, average deposits (on monthly basis) for last 3 years would be not less than Rs. 2 crore, etc.
Automated Teller Machines (ATM)
Prior approval of RBI need not be obtained from installation of ATMs in branches, Extension Counters and in the area of operation. Upon installation of the ATMs, the matter is to be reported to RBI for authorization.
Merger of loss making branches
Where two loss making branches of any RRB are in close proximity to each other (i.e. within a distance of about 5 kms.), RRB may consider merging the two branches with a view to rationalizing the spatial spread and reducing establishment/operating costs.
Other guidelines
RRBs are required to inform RBI as soon as the new branch/office is established. They are required to submit a list relating to its offices in India every quarter. Any change in status should also be required to report to RBI periodically.
Source: RBI M. Circular