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Master Circular on Branch Licensing - Regional Rural Banks (RRBs)
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RPCD.RRB.No.BL.BC. 84 /03.05.90 -A/2003-04 May 21, 2004 RBI / 2004/ 212
Dear Sir,
Section 23 of Banking Regulation Act, 1949 - Master Circular on Branch Licensing - Regional Rural Banks (RRBs)
Reserve Bank of India has been issuing instructions to RRBs regarding opening/shifting/merger of branches/extension counters/offices, etc. from time to time. With a view to consolidating all the current instructions which are valid as on date and incorporating certain changes made therein recently, a master circular has been prepared to enable RRBs to peruse the required information at a single source. The master circular consolidates all instructions relating to branch licensing of RRBs issued upto December 31,2003.
Please acknowledge receipt.
Yours faithfully,
(G.Srinivasan)
Encls : As above
Contents
Subject
3. Shisfting of General Branches
5. Opening of Extension Counters 6. Upgradation of Extension Counters into full fledged branches 7. Classification/Re-classification of centres 8. RRBs which are freed from Service Area Obligation 9. RRBs which are not free from Service Area Obligation 11. Procedure to be followed for relocation and conversion of branches 12. Submission of Returns on Branch Banking Master Circular on Branch Licensing of Regional Rural Banks (RRBs)
The opening of branches by banks is governed by the provisions of Section 23 of the Banking Regulation Act, 1949 (the Act). In terms of these provisions, banks cannot open a new place of business in India or abroad or change otherwise than within the same city, town or village, the location of the existing place of business without the prior approval of the RBI. Thus it is mandatory for RRBs to seek prior approval/ licence from Rural Planning and Credit Department (RPCD) of RBI before opening of new branches/offices. 1.1 General policy on Branch Licensing relating to RRBs
RRBs should fulfil the following conditions to become eligible for opening of new branches.
The Board of Directors of RRBs are required to decide on the policy and strategy for setting up new branches taking into account the yearly business plan, potential for business at the new centres for opening of branches, profitability of the proposed branches, the efficacy of the internal control system, redeployment of staff where surplus manpower has been identified and for extending prompt and cost-effective customer service to the clientele.
RRBs should obtain prior approval of their Board of Directors and recommendation of their Sponsor Banks before applying for opening /merger of branches/offices etc. The proposal for opening/shifting and merger of branches is to be submitted through NABARD in the prescribed application Form VI (Rule 12) of Banking Companies Rules, 1949 to RPCD, Central Office, Reserve Bank of India for approval/licence. (Annexure I)
Requests so received from banks for opening of branches are considered by Reserve Bank of India on the merits of each case and taking into consideration overall financial position of the bank, quality of its management, efficacy of the internal control system, profitability and other relevant factors.
After the receipt of authorisations from Reserve Bank of India, the banks should finalise premises and infrastructure etc. and approach the concerned Regional Office of Reserve Bank of India for issue of licence for opening of the branch/es. Further, if any, branch proposes to undertake government business, it would require prior approval of concerned Government authority as also of RBI, Central Office, Department of Government & Bank Accounts. The branch should be opened only after obtaining a licence from Reserve Bank of India. There should not be inordinate delay by banks in utilisation of authorisations/licences for opening of branches.
The RRBs can identify rural centres(population less than ten thousand), semi-urban centres (population more than ten thousand but less than one lakh), urban centres (population more than one lakh but less than ten lakh) and metropolitan centres (population more than ten lakh) for opening of branches depending upon the business potential and profitability of the proposed branches. They should forward through NABARD the proposals together with relative Board Resolutions and recommendation of their Sponsor Banks to Central Office of RPCD for prior approval. Requests from the RRBs for opening of branches at these centres will be considered on the merits of each case. Note : Population criteria mentioned above will be as per the latest census report figures of the centre(revenue unit and not locality).
RRBs having 50 or more branches are allowed to open Area Offices in the ratio of one Area Office for every 25 branches. The Area Offices are not permitted to transact any banking business. However, RRBs are required to obtain a licence from the concerned Regional Office of Reserve Bank of India prior to functioning/opening of these offices. RRBs can either shift or close these offices at their discretion without prior approval of RBI. However, for shifting of an Area office, banks should obtain necessary amendments to the licence from the concerned Regional Office of Reserve Bank of India prior to the shifting of the concerned offices. As regards merger of such offices, the licence has to be surrendered to the concerned Regional Office of RPCD of Reserve Bank of India for cancellation immediately after the merger of the
office under advice to Department of Statistical Analysis and Computer Services of Reserve Bank of India.
3. Shifting of general branches
3.1 At Rural Centres - Within the Block and Service Area
The shifting of branches in rural centres may be effected by RRBs themselves without obtaining the prior approval of Reserve Bank of India subject to their complying with the following conditions :
However, RRBs need to obtain amendment in the licence from the concerned Regional Office of Reserve Bank of India before effecting the shifting.
In case the semi-urban branches of RRBs have been allocated service area, the same norms of shifting of branches in rural centres would also be applicable for semi-urban centres. Where no service area has been allotted, RRBs may shift their branches at semi-urban centres within the same locality/municipal ward without the prior approval of Reserve Bank of India. However, they have to obtain an amendment to the licence from the concerned Regional Office of RPCD of
Reserve Bank of India prior to the shifting. Regarding shifting of branches outside the locality/municipal ward, RRBs have to obtain prior approval of the concerned Regional Office of RPCD. RRBs should, however, ensure that the locality/ward is not rendered unbanked due to the shifting of branch/es.
3.3 At Urban/Metropolitan Centres
The RRBs may shift their branches in urban/metropolitan centres within the same locality/municipal ward without the prior approval of Reserve Bank of India. However, they have to obtain an amendment to the licence prior to the shifting. Regarding shifting of branches outside the locality/municipal ward, RRBs have to obtain prior approval of the concerned Regional Offices of RPCD.
4.1 Conversion of full fledged rural branches into satellite/mobile offices
The RRBs may themselves decide the need for conversion of the existing loss making branches at rural centres into satellite offices keeping in view the cost-benefit aspect, the likely inconvenience that may be caused to the existing clientele, the effect of the conversion on the performance in the preparation of district credit plan and priority sector lending. The following guidelines may be followed by the RRBs for establishing satellite/mobile offices
Satellite Offices
Mobile Offices
The scheme of mobile offices envisages the extension of banking facilities through a well protected van with arrangements for two or three officials of the bank sitting in it with books, safe containing cash, etc. The mobile unit would visit the places proposed to be served by it on certain specified days/hours. The mobile offices would be attached to a branch of the RRB. The mobile offices should not visit the rural places which are served by co-operative banks and places served by regular offices of commercial banks.
Banks are required to obtain necessary amendments from the concerned Regional Office of Reserve Bank of India prior to conversion of rural branches into satellite/mobile offices. Conversion of branches into satellite offices at centres other than rural is not permissible.
5. Opening of Extension Counters
The RRBs can open extension counters at the premises of the institutions of which they are principal bankers after obtaining licence from the Regional Office of Reserve Bank of India for the purpose. Extension Counter can be opened within the premises of the RRB's head office and big offices/factories, hospitals, military units, educational institutions, etc. where there is a large complement of staff/workers, students, who because of their identical working hours and non-availability of banking facilities at a reasonable distance find it difficult to carry out their banking transactions. The Extension Counter should carry out limited type of banking business, such as,
Further, if the extension counter proposes to undertake government business, it would require prior approval of concerned Government authority as also of Reserve Bank of India, Central Office, Department of Govt. and Bank Accounts.
Extension Counter are not allowed to be opened at residential colonies, shopping complexes, market places and places of worship, etc.
RRBs should furnish particulars of the proposed extension counters in parts I and II of the format given in the Annexure II, to the concerned Regional Offices of RPCD, while applying for licence prior to opening of EC.
6. Upgradation of Extension Counters into full-fledged branches
7. Classification/Re-classification of centres
RRBs are advised to ascertain the population group classification of the centres of which they are not sure, from Department of Statistical Analysis
and Computer Services (DESACS), RBI, Banking Statistics Division, C-8/9, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051 before approaching RPCD for opening new branches. Any query with regard to reclassification of centres also may be referred to DESACS by the Head Office of the RRB along with relevant documents such as Gazette Notifications, etc. in support of the change.
8. RRBs which are freed from Service Area Obligations
The 54 RRBs, which are at present freed from Service Area Obligations, are generally not allowed to open new branches. They may, however, relocate their loss making branches at Taluka/Block headquarters, village markets, mandis, agricultural produce centres or similar centres (hereinafter referred to as 'specified centres') preferably within the same block. Alternatively, they may convert their loss making branches into Satellite/Mobile offices. Further, where two loss making branches of any RRB are in close proximity to each other (i.e. within a distance of about 5 kms.) they may consider merging the two branches.
9. RRBs which are not freed from Service Area Obligation
The proposals of RRBs relating to opening of new places of business (by RRBs under service area obligation) and merger of branches by all RRBs should be approved by their Boards of Directors as also the sub-group of DCC and submitted to NABARD alongwith recommendation of the concerned Sponsor Bank. The proposals duly recommended by NABARD, are required to be sent to Central Office of RBI (RPCD) for prior approval.
The approval of sub-group of DCC is, however, not necessary for opening of branches where no additional staff is to be recruited.
Opening of Extension Counters by RRBs requires prior approval of their Board of Directors as also prior licence from the concerned Regional Offices of RBI before opening of Extension Counters.
11. Procedure to be followed for relocation and conversion of branches Proposals relating to relocation of branches and conversion of branches into satellite/ mobile offices by RRBs should be approved by their Board of Directors and concerned sub-group of DCC. Prior approval of RBI is not necessary for relocation/conversion but the RRBs are required to obtain necessary amendment to the licence from the concerned Regional Office of RBI prior to effecting relocation/conversion.
12. Submission of Returns on Branch Banking
(ii) Further, RRBs should submit returns in Proformae given in Annexure III relating to the new offices/branches opened and change in status due to merger, etc. of existing offices/branches effected during the quarter to DESACS (Banking Statistics Division) and the concerned Regional Office of RPCD within 15 days of the end of the quarter to which they relate. 'Nil' Statement must be submitted in case there is nothing to report. (iii) In terms of Rule 13 of the Banking Regulations (Companies) Rules, 1949 banks are required to submit a list relating to its offices in India in Form VII within a period of one month from the close of every quarter to the office of RBI situated in the state in which their Head Office is located.
(Paragraph - 1.1)
Form of application for permission to open a new place of business or change the location (otherwise than within the same city, town or village) of the existing place of business under Section 23 of the Banking Regulation Act, 1949 - Banking Regulation (Companies) Rules 1949 Rule 12 Form VI
(Paragraph 10.2) Particulars to be furnished by the bank in respect of its request for an Extension Counter (E.C.) PART - I
Declaration to be made by the competent authority of the institution in the premises of which the EC is proposed to be opened. Part-II We have requested-----------------------------------to open the extension counter in the (Name of the bank) Premises of---------------------------------------------------------for the ( Name and full address of theinstitution) Benefit of the following persons attached to the above institution.@ Workers------------------------------------ Please indicate actual Numbers Staff/Employees------------------------- Separately Students ------------------------------------- Teachers-------------------------------- @ ( Where there are more than on institutionbeing managed by the authority issuing this letter which are also to be benefited by the EC, the names of these institutions, their distance from the proposed location of the extension counter,the number of students/staff etc. attached separately to each of the institutions, the name and the distance of their bankers should also be indicated separately)
2. (a)--------- ( Name of the bank and place)------------------------------is our principal banker We also deal with the following bankers (give names of bankers and their distance from the institution) 1.-------------------------------------- 2--------------------------------------- 3-------------------------------------- (b) Extent of our accounts with the principal bankers and other bankers as on -------(latest position please) Name of the bank Type of a/cs maintained amount 1. 2. 3. 4. 3. We undertake to provide necessary accommodation for the extension counter within the premises of our institution(mentioned at S.No 1 above) 4. We have no objection to allow outsiders to have access to the extension counter. 5. If the extension counter is proposed to be allowed to a bank other than the principal banker, the reasons therefore. 6. Whether a similar letter to any other bankers for the pupose has been issued:
(Signature of Competent authority on behalf of
[Paragraph - 17]
PROFORMA - I (Note : Proforma II & III has been renamed as Proforma I &II respectively)
Statement of New Office/Branch opened during the Quarter :
(Please read the instructions before filling the Proformae)
Part - I (7 digits) :
Part - II (7 digits) :
Part - I (7 digits) : Part - II (7 digits) :
PROFORMA - II
(Note : Proforma II & III has been renamed as Proforma I & II respectively). Statement of Change in Status/Merger/Closure etc. of Existing Office /Branch during the Month :____________________________
(Please read all instructions before filling the Proformae) Name of the Bank/Co-operative institution : - B.Change in Status/A.D.Category/Nature of Business/Postal Address of Office/Branch
B.Closure/Merger/Conversion of the Office/Branch
Instructions for filling Proformae I & II (Note : Proforma II & III has been renamed as Proforma I & II respectively) NOTE: PLEASE READ ALL INSTRUCTIONS BEFORE FILLING THE PROFORMAE 1. a) Proforma I is meant for all types of newly opened/upgraded bank branches/offices and Proforma II is meant for reporting change in status/postal address, closure/merger/conversion/relocation, etc. of existing bank branches/offices.
b) Uniform code numbers are meant for offices/branches which are administratively independent oiffices /branches, submitting separate returns to Reserve Bank of India. {See explanation at 7(b )}.
2. Banks may please note that in respect of newly opened/existing extension counter/satellite office/representative office/cash counter/ inspectorate/collection counter/mobile office/stand-alone ATMs / currency chest attached to the branches/Airport counter / Hotel counter/ Exchange Bureau /Temporary office opened at the site of Fairs exhibitions , etc. Proformae I & II need not be sent to Department of Statistical Analysis and Computer Services DESACS whereas the same must be submitted to the concerned Regional Offices of RBI.
3. Banks which have been allowed to assign Part I code to their new branches/offices should strictly follow instruction at I (b) mentioned above at the time of forwarding Proformae I to RBI. 4. Proformae I & II will not be accepted for allotment of Part I & II/ revision of Part II code unless all items in the proformae are filled up properly. EXPLANATION OF ITEMS IN PROFORMA I
Item No. 1( b): Public sector banks (SBI and its Associates & Nationalised Banks) are allowed to assign only Part - I code Numbers to their branches /offices and for otherbanks RBI (DESACS) allots both Part I & Part II codes. Item No. 2(a): The name of the Branch /Office is to be written. Item No. 2(b): Reference No. and date of allotment /authorisation/ approval letter issued by RBI is to be mentioned. Item No.2(c ) The Licence No., if already available (as obtained from concerned Regional Office of RBI) is to be written, otherwise the same should be communicated later on alongwith Uniform Codes.
Item No.2(d): The exact date of licence including month & year is to be indicated.
Item No.3: The exact date of opening including month & year is to be mentioned.
Item No.4.1 to The name/number/codes are to be written against the 4.3(c ) appropriate item number. Item No.4.4 : The name of the locality i.e. the exact place, where the branch/office is located, is to be mentioned. The name of the locality may be the name of a village in case the branch/office is opened in a village. Item No.4.5 : The name of the City/Town/Municipal Corporation under the jurisdiction of which the locality mentioned at item No.4.4 is included is to be written. The name of the village is to be written if the branch/office is opened in a village which is a revenue unit/centre. Note : If the name in item No. 4.5 is not indicated correctly, the branch/office may get wrongly classified with incorrect Part II code. The name of Panchayat/Block/.Tehsil/District should not appear against Item Nos.4.4 & 4.5 unless the office/branch is exactly located in the head quarter of Panchayat/Block/Tehsil/District. Item 4.6 & 4.7 : The names of the Tehsil/Taluka/Sub-division and the Community Development Block of the place mentioned against item No.4.5 are to be indicated at Item Nos.4.6 & 4.7 respectively. This may not be applicable in the cases of Metropolitan cities. Item No.5 : Latest Census population figure of the Centre/Revenue Unit (not of whole Panchayat/Block/Tehsil/District should be obtained from Census Handbook'/Local Census Authority/District Collector/Tehsildar and a certificate to this effect should be attached. Item No.6: If there is no branch/office of a regional rural bank or of any commercial/co-operative bank in the revenue unit within the limit of which the new office is located, then put tick mark against 'No', otherwise put tick mark against 'Yes'. Item No.7(a): The names respective codes of different types of possible status (type of branch/office) of a branch/office are listed below. The appropriate name and corresponding code are to be written. The list is not exhaustive & hence exact status of the office/branch may be written under 'Any other branch/ office' mentioning the name :
Item No. 7( b) : An office is administratively independent if it maintains separate book of accounts and/or is required to submit any one or more returns specified in 'Annexure' and note thereto in the 'Handbook of Instruction - Basic Statistical Return - 1& 2' (Revised edition - March 1996)
Item No. 7(c ) : Name of the base office and its Uniform Code Numbers are to be written if answer to 7(b) is 'No'. The name of temporary office {illustrated in instruction (2)} is to be mentioned.
Item No.8(iii)(d) : The appropriate Code among the options listed below is to be indicated.
Code Type of area
(0) Normal area (1) Border area (2) Disturbed area (High risk) (3) Area affected by natural calamities (flood/earth quake prone area, etc.) (4) Inaccessible due to inadequate transport facility because of snowfall, heavy storm,etc. Item No.9 : The appropriate nature of business (a list of which is given below) conducted by the branch/office is to be mentioned.
NATURE OF BUSINESS
CODE NAME (0) Only banking business (1) Banking & foreign exchange business (2) Administration, banking & foreign exchange business (3) Administration & banking
(7) Non-scheduled banks doing banking business (8) Other institution viz. Thomas Cook (India) Ltd., IDBI, ICICI, RBI dealing in foreign exchange
Item No.11 : The appropriate Code among the options listed below is to be indicated.
Code Technological Status
(1) Fully Computerised with ATM facility (2) Fully Computerised without ATM facility (3) Partially Computerised (4) Not yet Computerised (5) Stand-alone ATMs
Item No.12: The detailed particulars regarding Communication Hardware and Software, installed in the office/branch, are to be written. For example, RBINET, NICNET, VSAT, MainFrame etc.
Note : For further clarification regarding Proformae I & II contact or write to :
The Director Banking Statistics Division Department of Statistical Analysis & Computer Services Instructions for filling Proformae I & II (Note : Proforma II & III has been renamed as Proforma I & II respectively) NOTE : PLEASE READ ALL INSTRUCTIONS BEFORE FILLING THE PROFORMAE 1. a) Proforma I is meant for all types of newly opened/upgraded bank branches/offices and Proforma II is meant for reporting change in status/postal address, closure/merger/conversion/relocation, etc. of existing bank branches/offices. b) Uniform code numbers are meant for offices/branches which are administratively independent oiffices /branches, submitting separate returns to Reserve Bank of India. {See explanation at 7(b )}. 2. Banks may please note that in respect of newly opened/existing extension counter/satellite office/representative office/cash counter/ inspectorate/collection counter/mobile office/stand-alone ATMs / currency chest attached to the branches/Airport counter / Hotel counter/ Exchange Bureau /Temporary office opened at the site of Fairs exhibitions , etc. Proformae I & II need not be sent to Department of Statistical Analysis and Computer Services DESACS whereas the same must be submitted to the concerned Regional Offices of RBI. 3. Banks which have been allowed to assign Part I code to their new branches/offices should strictly follow instruction at I (b) mentioned above at the time of forwarding Proformae I to RBI. 4. Proformae I & II will not be accepted for allotment of Part I & II/ revision of Part II code unless all items in the proformae are filled up properly. EXPLANATION OF ITEMS IN PROFORMA I
Item No. 1( b): Public sector banks (SBI and its Associates &Nationalised Banks) are allowed to assign only Part - I code Numbers to their branches /offices and for otherbanks RBI (DESACS) allots both Part I & Part II codes. Item No. 2(a): The name of the Branch /Office is to be written.
List of Circulars consolidated by the Master Circular
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