RBI/2009-10/88
UBD.LS (PCB) MC.No.14/07.01.00/2009-10

July 01, 2009

All Primary (Urban) Co-operative Banks 

Dear Sir,

Master Circular on Area of Operation, Branch Authorisation Policy, Opening/ Up-gradation of Extension Counters, ATMs and Shifting/Splitting/Closure of Offices

Please refer to our Master Circular UBD.BL(PCB)MC.No.14/07.01.00/2008-09, dated July 1, 2008 on the captioned subject (available at RBI website /en/web/rbi/notifications/master-circulars).The enclosed Master Circular consolidates and updates all the instructions/guidelines on the subject up to June 30, 2009.

2. Please acknowledge receipt of this Master Circular to the Regional Office concerned of this Department.

Yours faithfully

(Smt. Uma Shankar)
Chief General Manager

Master Circular 
Area of Operation, Branch Authorisation Policy, Opening/Upgradation
of Extension Counters, ATMs and Shifting/Splitting/Closure of Offices

Master Circular on Area of Operation, Branch Authorisation Policy,
Opening/Upgradation of Extension Counters, ATMs and
Shifting/Splitting/Closure of Offices

1. Area of Operation

1.1   Introduction

Area of operation of a primary (urban) co-operative bank (UCB) means the geographical area/s as defined in its bye-laws, approved by the registering authority. UCBs may expand their area of operation through a resolution passed by the general body and getting the amended bye-law registered with the Registrar of Co-operative Societies (RCS). Banks are required to seek prior permission (no objection certificate) from the Reserve Bank of India for such revision, where applicable.

1.2 Regulatory Requirements

1.2.1 Extension of Area of Operation within the district of registration and adjoining districts within the State of registration:

1.2.1.1 Licensed UCBs Tier I and Tier II classified as Grade I by the Reserve Bank, may extend their area of operation to the whole of the district of registration and to its adjoining districts within their State of registration, without prior permission from the Reserve Bank.

1.2.1.2 Eligible banks need not approach Reserve Bank for seeking ‘no objection’ for extension of area of operation as stated above. Such banks may directly approach the RCS of the State concerned for extension of area of operation to the entire district of registration and its adjoining districts within the State of registration.

1.2.2 Extension of Area of Operation beyond the adjoining districts and to the entire State of registration

Sound and well functioning uni-state Tier II UCBs may extend their area of operation beyond the adjoining districts and to the entire State of Registration.

RBI will consider requests for expansion of area of operation to the entire state from licensed Tier II UCBs registered in states that have entered into MoU with Reserve Bank and are classified as Grade I as per the last statutory inspection and / or conforming to the financials of a Grade I bank as per the latest audited reports. While considering such applications, RBI will give due consideration to system of internal controls prevailing in the bank and supervisory comfort. UCBs desirous of extending their area of operation to the entire state may approach the Regional Offices of Reserve Bank for prior approval.

1.2.2.1 Its own funds (share capital + free reserves) should not be less than the entry point capital norms, prescribed for the highest category centre in that district(s), for organising a new general category bank, as indicated in Annex I.

1.2.2.2 For the purpose of classification of UCBs into Tier I and II, the following definition may be adopted hereafter for all regul- atory purposes in super session of instructions contained in circular UBD.(PCB).Cir.No.35/09.20.001/07-08 dated March7, 2008 :

Tier I Banks :

i)  Banks having deposits below Rs.100 crore operating in a single district,

ii) Banks with deposits below Rs.100 crore operating in more than one district will be treated as Tier I provided the branches are in contiguous districts and deposits and advances of branches in one district separately constitute at least 95% of the total deposits and advances respectively of the bank, and

iii) Banks with deposits below Rs.100 crore, whose branches were originally in a single district but subsequently, became multi-district due to reorganisation of the district may also be treated as Tier I.

Tier II Banks : All other Banks.

1.2.2.3 The deposit and advances as referred to in the definition may be reckoned  as on 31st March of the immediate preceding financial year.

1.2.3 Extension of Area of Operation beyond the State of registration and Extension of Area of Operation of Multi-State UCBs

Extension of Area of Operation beyond the State of registration and extension of Area of Operation of Multi-State Urban Co-operative Banks are not permitted according to the existing policy.

2. Branch Authorisation Policy

2.1 Introduction

In terms of Annual Policy Statements for the year 2007-08 and 2008-09 it has been decided to liberalise and rationalise the branch authorisation norms for well managed and financially sound UCBs in the States that have signed MoUs with Reserve Bank and those registered under Multi-State Co-operative Societies Act, 2002. The present policy is given in the following paragraphs:

2.2 Authorisation Policy

2.2.1 Eligibility Criteria

Well managed and financially sound UCBs in the States that have signed MoUs with Reserve Bank and those registered under Multi-State Co-operative Societies Act, 2002 may submit their proposals for branch expansion based on their Annual Business Plans (ABP) for approvals to the respective Regional Offices of the Urban Banks Department of RBI. ABP will be for a period of twelve months beginning 1st April of the following year. Before applying for allotment of Centres banks should ensure that they satisfy the following mutually exclusive performance / financial parameters:


2.2.1.1 Maintenance of a minimum CRAR of 10% on a continuous basis with minimum owned funds commensurate with entry point capital norms for the centre where branch is proposed. (Entry point norms for various categories of UCBs are given in Annex I)

2.2.1.2 Net NPAs being less than 10%.

2.2.1.3 No default in the maintenance of CRR/SLR during the preceding financial year.

2.2.1.4 Net profit in the immediate preceding financial year and

2.2.1.5 Regulatory comfort based on inter alia, track record of compliance with the provisions of Banking Regulation Act, 1949 (AACS), RBI Act, 1934 and the instructions/ directions issued by RBI from time to time.

2.2.1.6 Banks which have been organised as unit banks and have been extended relaxation in the entry point capital as indicated in Annex I, would be eligible to open branches only after augmenting their own funds to the level required for opening a new general category bank at the place where the bank was organised or where the branch is desired to be opened, whichever is higher. For instance, if a unit bank was organised at category ‘D’ centre and it intends to open a branch at ‘B’ category centre, such bank’s owned funds should necessarily be raised to entry point capital prescribed for organising a general category bank at ‘B’ category centre.

2.2.1.7 Similarly if a bank, other than a unit bank, desires to open a branch at a higher category centre, other than the centre at which it was established, within the district of its registration, the owned funds of the bank should at least be equivalent to the entry point capital prescribed for that centre. Illustratively, if a bank situated at ‘C’ category centre intends to open a branch at ‘B’ category centre, in the same district, its owned funds should be equivalent to the entry point capital prescribed for ‘B’ category centre.

2.2.1.8 However, a bank which desires to open a branch at a centre, other than its district of registration but within the state of registration, must have owned funds not less than the entry point capital required for organisation of a new general category bank at the highest category centre in that state. Illustratively, if a bank registered in district ‘X’ desires to open a branch in district ‘Y’ within its state of registration, then its owned funds should not be less than the entry point capital required for highest category centre in the state.

2.2.2 Selection of Centres

UCBs, satisfying the above mentioned norms may prepare an Annual Business Plan (ABP) for opening of branches (including extension counters, up gradation of extension counters into full-fledged branches and setting up of new off site Automated Teller Machines), in their existing area of operation, for the next 12 months, with the approval of their Board of Directors and submit the ABP, in duplicate, along with Annexes II to VI to the respective Regional Offices of Reserve Bank of India.  The plan may be submitted preferably by end of December of the previous financial year. 

2.2.2.1 Where the banks have opened extension counters without complying with the prescribed norms and subsequently approach Reserve Bank of India for up-gradation of the same into full-fledged branches, such banks would not be allotted centres unless they close unauthorised extension counters. Further, a centre where a bank has opened an unauthorised extension counter, such a centre would not be considered for opening a branch in future.

2.2.2.2 Scheduled banks which comply with the eligibility norms indicated at paragraph 2.2.1 above, may open mobile/satellite offices. Such of the scheduled banks which desire to open mobile/satellite offices may indicate the same in the format as per Annex IV enclosed to this circular along with other centres where they intend to open branches.

2.2.2.3 Banks need not indicate the exact address of the proposed branch in the ABP but may only indicate the name of the town/city within their area of operation, in the order of their preference, where they desire to open branches. Banks should choose the centres at which they wish to open branches after careful consideration of business potential and availability of premises at such centres.

2.2.2.4 A list of centres where a bank desires to open branches under the ABP should be indicated in the format as per Annex IV enclosed to this circular, and only one application need to be sent. The banks should not submit statements/ annexes, which are not required/called for, but submit only the requisite information/data, along with a certified copy of the latest audited balance sheet (as of 31 March) or a copy of the published Annual Report of the bank.

2.2.3 Approval for Centres

The banks which comply with the prescribed norms will be allotted centres strictly in the order of preference given by them. Once a centre is allotted, no request for change in the allotted centre would be entertained.

2.2.4 Authorisation and its Validity Period

2.2.4.1 A valid authorisation from the Reserve Bank of India is required for opening a new place of business including extension counters, off-site ATMs or changing the location of any existing place of business (except to the extent permitted vide para 5.1) under section 23 of the B. R. Act, 1949 (AACS).  After making arrangements for opening of branches, the bank should approach the Regional Offices of Urban Banks Department under whose jurisdiction they operate, in the prescribed Form V, indicating the exact postal address of the place where the branch is to be opened, for issuance of authorisation within a period of six months from the date of allotment of the centre.

2.2.4.2 Authorisation will be valid for one year from the date of issue, or one and a half year from the date of allotment of the centre, whichever is earlier.

2.2.4.3 Ordinarily, no extension of time will be granted after the expiry of validity period of licence. Only in exceptional cases, where the bank is unable to open the branch for reasons beyond its control, an extension of time not exceeding six months may be granted by the Regional Offices, under advice to Central Office.

2.2.5 Opening of branches without a valid authorisation from the Reserve Bank is an act of violation of section 23 of the B. R. Act, 1949 (AACS), and liable to attract penalties.

2.2.6 In case, the information/particulars furnished by any bank are found to be incorrect, the Reserve Bank of India will take a serious view in the matter and the bank will be liable for penal action, including debarring it from allotment of centres for a period of three years.

2.3 Procedural Guidelines for Permission to Open branches

Banks should ensure that there are no restrictions imposed by the local development or other authorities for setting up commercial establishment in the locality where the branch is proposed to be opened.

3. Opening of Extension Counters

3.1 Eligibility criteria and application procedure: Eligibility criteria and application procedure for opening of Extension Counters are prescribed in paragraphs 2.2.1 and 2.2.2.

3.2 Policy Approach: ECs may be opened within the premises of educational institutions, big offices, factories and hospitals of which the concerned UCB is the principal banker. Request from other banks to the institution may be considered, only if opening of an EC is not considered feasible by the principal banker and/or its base branch is beyond 10 kilo meters from the EC, after obtaining written consent from principal banker. UCBs may submit declaration from the institution in which it proposes to open EC in the format as per Annex VII. ECs may also be opened in the residential colonies provided no other branch/EC is already existing in the colony and no restrictions have been imposed by the local development or any other authorities for setting up a commercial establishment in the residential colony/ locality. No extension counter should be opened in market place, shopping centre, etc.

3.3 Norms for Opening of Extension Counters

A bank, which desires to open ECs should comply with the following norms:

3.3.1 Only one EC is permitted within the premises of any institution / office / hospital or in a residential colony.

3.3.2 Base branch of the bank to which the proposed extension counter is linked should be within a distance of 10 kilometers to facilitate incorporation of transactions of EC in the accounts of the base branch on a day-to-day basis.

3.3.3 While opening an extension counter, the bank should take into account important factors such as need, viability and overall merits of opening of the EC.

3.3.4 ECs should not be opened merely for collection of fees, payment of bills for electricity, water, telephones, etc. as it is primarily the responsibility of the institution concerned.

3.3.5 The facilities at an extension counter should be restricted to deposit / withdrawal transactions; issue and encashment of drafts and mail transfers; issue and encashment of travellers' cheques; collection of bills; advances against fixed deposits of their customers (within the sanctioning power of the officials concerned at the EC); and disbursement of other loans (only for individuals) sanctioned by the Head Office / base branch up to the limit of Rs.10.00 lakh only.

3.3.6 Such of the banks which have opened ECs, without seeking prior permission from RBI, will have to close down the same and these would not be considered for regularization / up-gradation into full-fledged branches.

3.4 Safe deposit locker facility at Extension Counters:

The permission to provide the facility of safe deposit lockers may be granted on merit to banks which comply with following criteria :

3.4.1 The bank should have complied with the prescribed capital adequacy norms.

3.4.2 The bank's net NPAs should be less than 7% of its net loans and advances.

3.4.3 The bank should have posted net profit for the last 3 consecutive years.

UCBs intending to provide safe deposit lockers at their extension counters should ensure that the institution in whose premises the extension counter is/proposed to be opened is agreeable for the provision of such facility and adequate security arrangements are in place at the premises.

3.5 Up-gradation of Extension Counters into full-fledged branches

3.5.1 Eligibility criteria and application procedure: Eligibility criteria and application procedure for up-gradation of Extension Counters are prescribed in paragraphs 2.2.1 and 2.2.2.

3.5.2 Up-gradation of EC into a branch is treated as equivalent to allotment of centre for opening of a branch. Only such of the ECs as have been accorded post-facto approval by the Reserve Bank of India or opened with the prior approval of the Reserve Bank will be considered for up-gradation into a branch.

3.5.3 Up-gradation of the extension counters is permitted after completion of three years of their operation as EC.

3.5.4 The shifting / relocation of these branches, if considered necessary by the bank, would be permitted subject to the following conditions:

3.5.4.1 The proposal is for shifting / relocation of the converted branch within the city / town limit.

3.5.4.2 Banking services to the existing customers of the extension counter, including the institutional customer, are ensured.

3.5.4.3 No new extension counter will be allowed in the institution in which the extension counter is housed presently.

4. Automated Teller Machines (ATMs)

4.1 On-site ATMs

UCBs that are registered in States, which have entered into MoU with RBI or are registered under the Multi-State Co-op. Societies Act, 2002 and classified in Grades I and II, may set up on-site ATMs without prior approval of the Reserve Bank.

4.2 Off-site ATMs

The banks may open off site ATMs at place other than its branches / extension counters:

4.2.1 Eligibility criteria and application procedure: Eligibility criteria and application procedure for opening of off-site ATMs are prescribed in paragraphs 2.2.1 and 2.2.2.

4.2.2 Following functional facilities may be provided at off-site ATMs :

4.2.2.1 PIN changes

4.2.2.2 Requisition for cheque books

4.2.2.3 Statement of accounts

4.2.2.4 Balance enquiry

4.2.3 Inter-account transfer - restricted to accounts of the same customer at the same centre.

4.2.4 Banks may provide telephone connection between the "stand alone" ATMs with branch ATMs and Shared Payment Network System (SPNS). However, no person other than security guard should be posted at such non-branch stand-alone ATM centers.

4.2.5 UCBs are free to share / interlink their ATMs with other banks.

5. Shifting / Splitting / Closure of Offices

5.1 Shifting of Offices

5.1.1 Licensed UCBs, categorised as Grades I/ II  may shift their place of business, including administrative office, located in the semi-urban areas anywhere within the same town, irrespective of distance vis-à-vis other banks/offices, etc. without prior permission of the Reserve Bank. As regards banks located in urban / metropolitan centers, shifting within the same locality / municipal ward is permitted in respect of licensed UCBs, categorised as Grade I/II without prior permission of the Reserve Bank.

A report in the format, as per Annex VIII should be submitted in duplicate to the Regional Office concerned of this Department within a month from the date of shifting where RBI's prior approval is not required.

5.1.2 For shifting to a different locality / municipal ward, licensed UCBs, categorised as Grade I/II are required to obtain prior permission and may submit their application as per the format in AnnexIX.

5.1.3 Shifting branches from one city to another:

The requests of UCBs (other than Unit banks) to shift their branches from one city to another in their area of operation within the same State will be considered subject to their compliance with the following conditions:

5.1.3.1 The new centre is of the same or lower population group as the existing centre e.g. a branch at a 'D' centre can be shifted to another 'D' centre only; and

5.1.3.2 A branch located in under-banked district can be shifted to another centre in under-banked district only.

5.1.3.3 The shifting should be beneficial to the bank in terms of cost and business.

UCBs, which desire such shifting are required to submit their applications in this regard to the Regional Office concerned of the Urban Banks Department for prior permission.

5.2 Splitting or Part Shifting of branches within the Same Locality/Municipal Ward

5.2.1 Splitting of branches or part shifting of some of the departments of parent office/branch can be made to a near by location within the same locality/municipal ward due to space constraints and for better customer service or for convenience of the members, irrespective of the distance vis-à-vis other offices/banks, without prior permission of the Reserve Bank of India subject to the condition that identical business is not conducted from both the premises.

5.2.2 A post-facto report to this effect, in the format as mentioned in para 5.1.1.2, should be submitted in duplicate to the Regional Office concerned within one month from the date of shifting.

5.3 Closure of Branches and Extension Counters

UCBs are allowed closure of un-remunerative branches/ ECs without prior   permission of RBI subject to the following conditions :

5.3.1 Bank should not have been placed under any directions under section 35A of the B R Act, 1949 (AACS).

5.3.2 Decision to close down ECs/branches should be taken by the Board after taking into account all the relevant factors and should be properly minuted in the official record of proceedings of the Board meeting.

5.3.3 Bank should give proper notice to all existing depositors/ clients of the branch through press release in local leading newspapers as well as in the form of circular letter to each constituent of the branch, well in advance of closure of the branch.

5.3.4 It should return the original licence/s issued for the closed branch to the Regional Office concerned of this department.

5.3.5 The disposal of the premises occupied by the erstwhile branch   should be reported to our Regional Office concerned and the RCS.

5.3.6 Bank should not open extension counter in the same place  after closure of branch/es.

5.3.7 Bank should report to the Regional Office concerned of Reserve Bank of India, in Form VI prescribed under Rule 8 of Banking Regulations (Co-operative Societies) Rules, 1966 after closing the branches, within one month from the date of closure, along with copies of the relative Board resolution.

5.3.8 The bank should preserve all the relevant records and make them available to Reserve Bank inspection team for scrutiny during the course of inspection.

6. UCBs categorised as Grade III / IV (shifting, acquisition / surrender of leased premises, etc.)

UCBs, which are categorised as Grade III / IV and not complying with section 11 (1) of B. R. Act, 1949 (AACS), will be, as hitherto, required to obtain prior approval of the Reserve Bank and / or Registrar of Co-operative Societies for :

6.1 Sale of bank's own premises
6.2 Surrender of existing premises taken on lease/rental basis
6.3 Acquisition of new premises on ownership or lease/rental basis
6.4 Shifting of offices/departments as a result of sale of premises/surrender of premises/acquisition of new premises.

Such banks are required to submit their application in enclosed format given at Annex X in duplicate to the Regional Office concerned.

7. Authorisation Policy for salary Earners' Banks :

7.1 In view of their special status the salary earners' banks (SEBs) have not been covered under ABP for opening of new branches. Requests for allotment of centres may be considered only from licensed Grade I SEBs on their fulfilling certain specified norms. SEBs fulfilling the under-noted norms may apply for opening of branches:

7.1.1 The bye-laws should not contain provision for giving loans to outsiders (non-employees) by enrolling them as members/nominal members.

7.1.2 There should at least be 1000 members at a place where the SEB desires to open a branch.

7.1.3 It should comply with the regulatory framework prescribed by RBI.

7.1.4 It should have posted net profits during each of the preceding two years.

7.1.5 Its net NPAs should be less than 10% of its net loans and advances as on the last balance sheet date and it should have made requisite provisions as per RBI guidelines.

7.1.6 CRAR of the bank should not be less than that prescribed by RBI from time to time.

7.1.7 In case a bank desires to open a new branch within its district of registration, its owned funds should, at least be equal to the entry point capital norms indicated in Annex I for opening a new general category bank at that centre where the bank was organised or where the branch is desired to be opened, whichever is higher. Illustratively, if a SEB organised in the "C" category centre desires to open a branch in "B" category centre within its district of registration, its owned funds should be at least equivalent to the entry point capital norm prescribed for "B" category centre.

7.1.8 SEB desirous to open a branch, outside its district of registration but within the State of registration, should have owned funds not less than the entry point capital norm prescribed for opening a new general category bank at the highest category centre in that State. The entry point capital norms prescribed are indicated in Annex I enclosed to this circular.

7.1.9 SEBs, which satisfy the norms indicated above, may prepare and get their branch expansion programme approved by their Board of Directors and forward the same to the Regional Office concerned of the Urban Banks Department giving information in Annexes I, II & III enclosed to our circular UBD BL (SEB) No.5A/07.01.00/ 2001-02 dated 8 August 2001. Annex III indicating classification of assets and provision made against non-performing assets should be duly certified by Statutory Auditor/Chartered Accountant under his stamp and signature. Once a centre is allotted no request for change in the allotted centre would be entertained.On receipt of the allotment letter the banks may make preliminary arrangements for opening the branches and submit applications in Form V for issue of branch authorisation/s, within six months from the date of allotment of the centre. The banks should note to open the branches only after obtaining branch authorisation and within the validity period of the branch authorisation. No request for extension of time for opening the branch will be entertained except in the circumstances beyond the control of the bank.

8. Submission of wrong information:   It may be carefully noted that in case the information/particulars furnished by a bank is found incorrect, Reserve Bank would take a serious view in the matter and the bank concerned would be liable for penal action, including debarring it from allotment of centres for the next three years.

9. Resolution of Board of Directors

The proposals of UCBs for extension of Area of Operation, opening of branches, extension counters etc., shifting of offices, splitting of branches, etc. should be sent only with the prior approval of the bank's Board of Directors and appropriate resolutions in this behalf should be passed. The relevant resolutions should be submitted to the Regional Offices concerned while approaching them for prior / post-facto approval therefor. The relevant records may also be preserved and made available to the Reserve Bank's inspection team for scrutiny during the course of inspection.

10. Branch Banking Statistics-Submission of Quarterly Returns -Revision of Proformae I & II

With a view to streamlining and updating the system of compilation of branch banking data, maintained by the Department of Statistics and Information Management (DSIM), Central Office, Bandra Kurla Complex, Mumbai and Regional Offices of UBD, the Proformae I & II submitted by banks have been revised in order to include details in respect of Not Administratively Independent Offices (NAIOs) like Extension Counters, Satellite Offices, ATMs etc. The quarterly Proformae I and II should be submitted by all UCBs to DSIM and Regional Offices of UBD. The detailed instructions in this regard are given in our circular UBD.CO.LS.Cir.No. 43/07.01.000/2006-07 dated May 9, 2007.

11 Acquisition of Accommodation on Lease / Rental Basis by
Primary Cooperative Banks for their Use (i.e., for Office and Residence of Staff)

11.1 The authorisations issued for opening of bank branches / offices are location-specific in as much as, in terms of the extant instructions, Reserve Bank of India issues authorisation / permission for opening a bank branch / office at a particular centre based on the exact postal address of the place where the branch / office is to be opened. In the circumstances, it is incumbent upon banks to ensure that their branches are operating from premises, which have a subsisting and valid lease agreement, free of any dispute between the bank and the landlords of the premises in question. Therefore, Head Offices of banks were advised to undertake a review in this regard.

11.2 Banks were also required to report, before October 15, 2008, the list of their branches / offices, that are operating in premises in respect of which a dispute is pending with the landlord, to the Regional Director (RD) of Reserve Bank of India concerned (i.e., RD of the Regional Office of RBI under whose jurisdiction the branch / office in respect of which a dispute is pending is functioning), as per the format given at Annex XI to enable RBI to take a view on the appropriateness, or otherwise, of continuing the authorization for the branch / office which is functioning in a 'disputed' premises. Further, banks are also required to furnish quarterly progress reports (as at the end of March, June, September and December) in the same format to the RD of the Regional Office of RBI concerned, within a period of one month from the close of the respective quarter to which the report relates. It may be noted in this regard that in respect of branches / offices situated in Maharashtra / Goa, the information will be furnished by banks to the Chief General Manager, Urban Banks Department, Reserve Bank of India, Mumbai Regional Office, Garment House, 2nd Floor, Worli, Mumbai-400018.

Appendix – I

 A.  List of Circulars consolidated in the Master Circular