The Reserve Bank of India (RBI) has come out with a flexible branch licensing policy for transfer of branches in rural/ semi-urban centres from one commercial bank to another.
The central bank said that all issues connected with the transfer of assets and liabilities, staff etc of the branches proposed should be sorted out by the banks themselves on mutually agreed terms, subject to its guidelines.
According to the RBI, the consideration arrived at for takeover should provide for additional contingent liabilities, if any, that may have to be taken over by the new bank.
All issues relating to transfer of borrowal accounts of the existing branch should be sorted out by the banks themselves on mutually agreed terms and conditions.
The existing borrowers should not be put into any disadvantage and they may be given the choice of continuing with the existing bank or the new bank.
The transfer of a branch from one bank to another would lead to transfer of deposit accounts from one bank to another.
Such deposits will continue to be governed by the terms of contract agreed to between the customer and the bank branch that is being taken over.
Accordingly, the same rate of interest will be payable till maturity on such transferred deposits, as was payable at the time of takeover of the branch.
Where depositors of the branch being taken over desire premature withdrawal of deposit consequent to the transfer of business to another bank, they should be allowed to do so without imposing any penalty.
After a detailed agreement is reached on transfer, the bank taking over the branch may forward the licence to the concerned Regional Office of RBI for cancellation and obtain a fresh licence prior to transfer.
The consideration receivable by the bank will be a current business income and treated accordingly.
At present a branch which is the only bank branch functioning at a rural centre is not permitted to be shifted / closed/ merged outside the service area as this would render the relative area unbanked.
Consequently, in cases where the rural branch of another bank being taken over is the only branch functioning in the village/town, the bank taking over the branch will not be permitted to merge it with any other of its existing branch in rural/ semi- urban area (with service area obligation), as it would render the area unbanked.
