For foreign banks, the regulator continues with its current restrictive policy.
The Reserve Bank of India (RBI) has allowed banks to convert their general banking branches into specialised ones. However, even under the new format, these branches should also continue to serve existing customers, RBI said.
Banks, which open specialised branches for retail or small and medium enterprise (SME) customers, need separate licence from the regulator at present.
As proposed in the second quarter review of the monetary policy, the central bank has announced the liberalisation of branch licensing for Indian banks. They can now open branches in Tier-III to Tier-VI cities, semi urban and rural areas. For opening branches in Tier-I and II cities or in metros, banks will still have to seek RBI’s permission. However, they will not need a prior RBI approval for opening branches in urban centres of Sikkim and the North East.
The branch licensing policy has been liberalised to enhance banking penetration and financial inclusion.
Regarding foreign banks, RBI will continue to have a restrictive policy until a detailed road map for foreign banks is drawn.
It has been recommended that banks plan their branch expansion in Tier-III to Tier-VI centres in such a manner that at least one-third of such branches are in under-banked areas.
The granting of new branch licences in metro cities would also depend on the bank’s performance on the parameters of financial inclusion, priority sector lending, customer service, RBI said.
