ICICI Bank can open branches

RBI lifts ban following IPO scam, reprieve for HDFC Bank soon.

The Reserve Bank of India (RBI) has permitted ICICI Bank to open new branches and set up off-site ATMs. This signifies the lifting of the ban, imposed by the banking regulator, on the branch expansion of a slew of commercial banks involved in the initial public offer (IPO) allotment scam.

These banks were also fined for their role in the scam. Sources said HDFC Bank would soon be allowed to open new branches.

The central bank has called executives of HDFC Bank, another bank tainted in the scam, for a meeting to discuss its branch expansion plans. It has asked them to furnish details on the current state of the bank's risk management procedures.

RBI Governor YV Reddy had last month stated that the RBI would allow these banks to open new branches once it was convinced about the improvements in their risk control systems. ICICI Bank and HDFC Bank, between them, have plans to open 500 new branches.

In a one-line statement, ICICI Bank, the country's second largest bank, said it had "received the Reserve Bank of India's approval for establishing new branches and additional off-site ATMs." It, however, did not disclose the number of branches and ATMs it could open.

The ban on expansion was imposed following penalties imposed in January 2006 on nine banks "" Bharat Overseas, Citibank, HDFC Bank, ICICI Bank, Indian Overseas Bank, Standard Chartered Bank, Vijaya Bank, IDBI Bank and ING Vysya Bank "" for violation of the RBI's instructions on extending finance to retail customers for purchase of shares in IPOs.

Initially, the RBI wanted to impose a three-year ban. These banks were not allowed to open new branches last year, when the RBI started investigating the scam.

This year, too, they have not been permitted to open new branches. The permission to open branches will probably take effect in January. In other words, the ban continued for two years. Licences for opening branches are given in a calendar year after the banks submit their annual plans.

Banking sources said ICICI Bank had received permission to open branches in rural areas and off-site ATMs primarily in semi-urban centres.