Master Circular on Branch Authorisation - ਆਰਬੀਆਈ - Reserve Bank of India
Master Circular on Branch Authorisation
RBI/2014-15/77 July 1, 2014 All Commercial Banks Dear Sir/Madam, Section 23 of the Banking Regulation Act, 1949 – Master Circular on Branch Authorisation Please refer to the Master Circular DBOD No. BAPD.BC. 18 /22.01.001/2013-14 dated July 1, 2013 consolidating instructions / guidelines issued to banks on Branch Authorisation till June 30, 2013. The Master Circular has been suitably updated by incorporating the instructions issued up to June 30, 2014. The Master Circular has been placed on the RBI website (/en/web/rbi). 2. Foreign banks may be guided by paragraph 3.3 of this Master Circular. Yours faithfully, (Lily Vadera) Master Circular on Branch Authorisation
To provide a framework of rules/regulations/procedures to be followed by banks while opening/shifting/closing branches in India in accordance with provisions of Section 23 of the Banking Regulation Act, 1949. A statutory guideline issued by Reserve Bank of India. C. Previous Guidelines consolidated The Master Circular updates the instructions contained in the circulars listed in the Appendix. To all commercial banks (other than RRBs) including Local Area Banks. 1. Introduction The opening of new branches and shifting of existing branches of banks is governed by the provisions of Section 23 of the Banking Regulation Act, 1949. In terms of these provisions, banks cannot, without the prior approval of the Reserve Bank of India (RBI), 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. Section 23 (2) of the Banking Regulation Act lays down that before granting any permission under this section, the Reserve Bank may require to be satisfied, by an inspection under Section 35 or otherwise, as to the financial condition and history of the banking company, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location of the existing place of business. Commercial banks (other than RRBs) including Local Area Banks should approach the Department of Banking Operations & Development, Reserve Bank of India, Central Office (DBOD, CO) in this regard. The policy for authorisation of branches in India is summarized in the following paragraphs. For the purpose of branch authorisation policy, a "branch" would include all branches i.e full-fledged branches, specialised branches, satellite offices, mobile branches Extension Counters, off-site ATMs (Automated Teller Machines), administrative offices, controlling offices, service branches (back office or processing centre) etc. A call centre will not be treated as a branch. A call centre is one, where only accounts or product information is provided to the customer through tele-banking facility and no banking transaction is undertaken through such centres. Also, no direct interface with clients/customers is permitted at call centres. 3. Branch Authorisation Policy With the objective of liberalising and rationalising authorisation of branches in India, a framework for a branch authorisation policy, which would be consistent with the medium term corporate strategy of banks and public interest, has been put in place. In addition to the requirement relating to the financial condition and history of the banking company, the general character of its management, and the adequacy of its capital structure and earning prospects, the branch authorisation policy framework would have the elements enumerated in the following paragraphs. 3.1 Domestic scheduled commercial banks (other than RRBs) are, with effect from September 19, 2013, permitted to open branches in Tier 1 to Tier 6 centres without having the need to take permission from Reserve Bank of India in each case, subject to certain conditions. The guidelines for authorisation (opening) of branches of domestic scheduled commercial banks in India are given as under
3.2 Domestic Scheduled Commercial Banks from whom general permission has been withdrawn as well as Local Area Banks (LABs) will, as hitherto, continue to obtain prior approval of DBOD,CO, RBI before opening a new branch / office by submitting their application in Form VI given in Annex 11A on an annual basis. i) The Annual Branch Expansion Plan (ABEP) with the consolidated details regarding proposals for opening, closing, shifting, merger and conversion of all category of branches where prior permission of RBI is required in terms of the extant instructions along with the summary of branches, proposed to be opened may be submitted as per Proforma given in Annex 11 B. Along with this, information sought in Annex 11 (C, D, E, F & G) should also be furnished. On approval of the consolidated proposal, individual proposals for opening new branches at specific centres, for which prior permission is required from RBI, must be submitted in the prescribed Form VI in terms of Rule 12 of the Banking Regulation (Companies Rules), 1949, to the Department of Banking Operations and Development (DBOD), Reserve Bank of India, Central Office, Mumbai for approval. The Proforma of Form VI is given in Annex-11 A. Form VI is not required to be submitted in respect of Credit Card Centres and Back Offices/Processing Centres. ii) Banks are free to submit their ABEP any time during the year. It is not linked either to the financial year or calendar year. Notwithstanding the above, banks may approach RBI for any urgent proposals regarding opening of branches, especially in under banked areas (districts) anytime during the year, in addition to the authorizations granted under the ABEP, which would be considered on merit. As the concept of the ABEP was introduced to enable banks to plan their branch expansion as part of a medium term strategy, it is not expected that such proposals will be made frequently. iii) The ABEP and any other proposals required to be submitted to RBI in this regard should have the approval of the Board of Directors of the bank or such other authority to which powers have been delegated by the Board of the bank. Banks may ensure that an authenticated / certified copy of such approval is invariably submitted along with these proposals. iv) The validity of the authorisation granted would be one year from the date of the issue of the letter of authorisation/permission. Generally, no extension in validity period of the authorisation would be allowed. However, in case a bank is unable to open a particular branch due to genuine reasons during the validity period of one year, they may approach the Regional Office concerned of Department of Banking Supervision (DBS), Reserve Bank of India or the Department of Banking Operations and Development, Central Office, Reserve Bank of India, Mumbai (DBOD, CO), (in respect of branches in Maharashtra & Goa), before expiry of validity period of authorisation for extension of time for a further period not exceeding one year. At centres where a bank fails to open a branch within the validity period of the authorisation i.e. one year (or within the extended time of another year, as the case may be), the permission granted would automatically lapse and if a bank is still interested in opening the branch at that centre, they should include it as a fresh proposal in the next ABEP. v) As regards the public interest dimensions of the policy framework, the following aspects would be kept in view while processing branch authorisation requests:
vi) As regards the procedural aspects, the existing system of granting authorisations for opening individual branches from time to time has been replaced by a system of giving aggregated approvals, on an annual basis. The medium term framework and the specific proposals would cover the opening, closing, shifting, merger and conversion of all categories of branches. vii) In terms of the existing branch authorisation policy, banks will not be required to approach the Regional Offices concerned of Reserve Bank of India for "licence" for opening branches. viii) Domestic Scheduled Commercial Banks that have to seek prior permission for opening branches, while preparing their Annual Branch Expansion Plan (ABEP), should allocate at least 25 percent of the total number of branches proposed to be opened during a year in unbanked rural (Tier 5 and Tier 6) centres. An unbanked rural centre would mean a rural (Tier 5 and Tier 6) centre that does not have a brick and mortar structure of any scheduled commercial bank for customer based banking transactions. ix) In view of the requirement for opening at least 25 per cent of the branches under ABEP in unbanked rural centres, for each branch proposed to be opened in Tier 2 to Tier 6 centres of under banked districts of under banked States, excluding such of the rural branches proposed to be opened in unbanked rural centres that may be located in the under banked districts of under banked States in compliance with the requirement as indicated in sub para vii above, authorisation will be given for opening of a branch in a Tier 1 centre. This will be in addition to the authorisation given for branches in Tier 1 centres based on the considerations stated above. x) Banks may consider front-loading (prioritising) the opening of branches in unbanked rural centres over a 3 year cycle co-terminus with their Financial Inclusion Plan (2013-16). Credit will be given for the branches opened in unbanked rural centres in excess of the required 25 percent of the ABEP for the year which will be carried forward for achieving the criteria in the subsequent ABEP / year of the Financial Inclusion Plan (FIP). xi) Proposals for opening of Specialised Branches in Tier 1 centres may also be submitted along with the ABEP. xii) Where the banks do not find it viable to open branches in rural areas, they may open Satellite Offices. The application for opening of the Satellite Office along with relative Board approval should be included in the ABEP. The following guidelines may be followed by the banks for establishing Satellite Offices:
xiii) Banks desirous of setting up Extension Counters may approach DBOD CO with application in original (as given in Annex 11I) complete in all respects, along with a certified copy of the approval by the competent authority. Banks can open Extension Counters at the premises of the institutions of which they are the principal bankers after obtaining authorisation from DBOD, CO, Mumbai for the purpose. Extension Counters can be opened within the premises of 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 Counters should carry out limited type of banking business, such as deposit/withdrawal transactions, issuing and encashment of drafts and mail transfers, issue and encashment of travellers’ cheques, sale of gift cheques, collection of bills, advances against fixed deposits of their customers (within the sanctioning power of the officials concerned at the Extension Counter), facility of safe deposit locker (provided adequate security arrangements are made), depository services to its customers provided the bank is registered with SEBI as Depository Participant. The Extension Count (EC) should not extend credit facility against pledge of dematerialised securities or facilitate Securities Lending and Borrowing thereat. Further, if the EC proposes to undertake government business it would require prior approval of Government authority concerned as also of Department of Government & Bank Accounts, Reserve Bank of India, Central Office. Extension Counters are not allowed to be opened at residential colonies, shopping complexes, market places and places of worship, etc. xiv) Authorisation for opening branches in Tier 1 centres will not generally exceed the total number of branches proposed to be opened in Tier 2 to Tier 6 centres as well as in the rural, semi-urban and urban centres in the North-Eastern States and Sikkim. While issuing such authorisation, Reserve Bank of India will factor in whether at least 25 percent of the total number of branches to be opened during a year, are proposed to be opened in unbanked rural centres. xv) The number of branches, which would be authorized by the Reserve Bank based on applications for branches to be opened in Tier 1 centres, would also depend upon a critical assessment of the bank's performance in financial inclusion, priority sector lending, customer service, etc. 3.3 . Foreign Banks The general permission granted to domestic scheduled commercial banks vide paragraph 3.1 above for opening branches in India will not be applicable to foreign banks. The Branch Authorisation Policy would be applicable to foreign banks, subject to the following :
Accordingly, foreign banks should submit their ABEP to the Reserve Bank of India, DBOD, International Banking Division, Central Office, Central Office Building (13th floor), Shahid Bhagat Singh Marg, Mumbai - 400 001. i) In view of the general permission to Domestic Scheduled Commercial for opening branches in Tier 1 to Tier 6 centres, any proposals for substitution of centres would be subject to the approval of the Board of banks. However, it should be ensured that the guidelines in paragraph 3.1 above are adhered to while carrying out substitution of centres. ii) Domestic Scheduled Commercial Banks that have to seek prior permission for opening branches as well as Local Area Banks (LABs) should make proper assessment while finalising the centre/place for opening of a branch keeping in view the business potential for opening of the branch thereat. Normally substitution of centres would not be allowed. However, under exceptional circumstances, if banks are unable to open branch at the proposed centre due to genuine problem, banks should approach DBOD, CO along with reasons thereof. The bank should submit Form VI in respect of the new centre. All such requests will be examined on a case-to-case basis. iii) Substitution of centres would be allowed to centres of a similar population group or to a lower population group provided banks undertake to open the branch within the period of validity of authorisation issued. Further, the substitution would not be allowed from a centre in an under banked district to a centre in other than an under banked district. i) General a) Shifting of branches should be part of the medium term corporate strategy of branch expansion. Accordingly, proposals requiring approval of RBI should be submitted to DBOD,CO, RBI as per Proforma given in Annex 5. b) Banks should, however, ensure that customers of the branch, which is being shifted, are informed well in time before actual shifting of the branch, so as to avoid inconvenience to them. c) The details of shifting (i.e. new address, date of shifting, etc.) should be reported to Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra and Goa) immediately after shifting the branch, and in any case not later than two weeks after the shifting. No amendment in licence would be required in such cases. d) The shifting of branches should also meet the following minimum criteria:
e) In terms of the mail box clarification issued dated June 17, 2014, foreign banks in India have to seek prior permission of DBOD, International Banking Division, Central Office, for the purpose of shifting of their branches from one centre to another. ii) Shifting within the Centre (City/Town/Village) Banks have been given freedom to shift a branch to any location within the centre (city/town/village) without seeking prior approval from RBI. iii) Rural Branches a) Within the block
b) Outside the Block Requests for shifting of branches from centres, which are served by more than one commercial bank branch (excluding Regional Rural Bank branch) outside the block should be submitted to DBOD,CO, RBI for approval and the same will be considered based on the following parameters:
iv) Metropolitan, Urban and Semi Urban Branches
v) Part-shifting of Branches Banks will have to approach Reserve Bank of India, Central Office, DBOD, Branch Authorisation and Policy Division (BAPD) for domestic banks and International Banking Division (IBD) for foreign banks) for approval for shifting of some activities/part-shifting of the branch. Part shifting of the branches will be considered by RBI on a case-to-case basis, subject to the following norms:-
i) Conversion of Specialised Branch Banks may convert a specialized branch into another category of specialized branch or a general banking branch at their discretion. However, it may be ensured that details thereof are advised to the Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra and Goa) immediately after the conversion of the branch, and in any case not later than two weeks after conversion. No amendment to licence/authorization would be required. ii) Conversion of General Banking Branches to any type of Specialized Branch Banks are free to convert their general banking branches into specialised branches subject to the condition that the bank should continue to serve the existing customers of the general banking branches, which are being converted into specialized branches. However, it may be ensured that details thereof are advised to Regional Office concerned of DBS or DBOD, CO (in respect of branches in Maharashtra & Goa) immediately after the conversion of the branch, and in any case not later than two weeks after conversion. No amendment to the licence/authorization would be required. iii) Upgradation of Extension Counters and Satellite Offices into Full-fledged Branches a) Banks are free to convert their existing Extension Counters (ECs) and Satellite Offices (SO) into full-fledged branches at their discretion and relocate them within that centre. However, banks should surrender the licences (if separate licence has been issued) of Extension Counters/Satellite Office and obtain a permission letter for full-fledged branch before effecting Upgradation, from Regional Office concerned of DBS or DBOD, CO (in respect of ECs/SOs in Maharashtra & Goa). b) In cases where banks desire to upgrade their existing Extension Counters and Satellite Offices into full-fledged branches and relocate the same to another centre, the same may be carried out subject to the approval of their Boards and the conditions mentioned in paragraph 3.1(vi). - Banks not having general permission should continue to submit such proposals to DBOD, CO for approval. iv) Conversion of Rural Branch into Satellite Office Conversion of a rural branch into satellite office is generally not favoured. However, in exceptional circumstances, such proposals may be considered. The proposals for conversion of rural branches into satellite offices should be submitted to DBOD,CO, RBI after obtaining approval from the District Consultative Committee (DCC) for our consideration. i) General
ii) Merger of Sole Rural/Semi Urban Branch As a matter of policy, merger of a sole rural branch/semi-urban branch is not permitted, as merging the same with a branch outside the centre would render the centre unbanked. However, under exceptional/unforeseen circumstances (natural calamity, adverse law and order condition, etc.), if the bank is compelled to merge any sole rural/semi urban branch, DCC approval should be obtained and proposal thereof should be included in the annual plan for our consideration. Details of such proposals for rural and semi urban branches are required to be furnished to us for our approval as per Proforma in Annex 6. iii) Merger of Metropolitan, Urban and Semi Urban Branches Banks may merge one branch with another branch at Metropolitan, Urban and Semi-urban centres (not assigned any responsibility under Government sponsored programme), without seeking prior approval from RBI. As such, these proposals should not be included in the ABEP for our approval. i) General
ii) Closure of Rural Branches As a matter of policy, closure of even loss making branches at rural centres having a single commercial bank branch (excluding Regional Rural Bank branch) is not permitted, as closure would render the centre unbanked. The proposal for closure of a rural branch at a centre served by more than one commercial bank branch should be included in the ABEP after obtaining approval of District Consultative Committee (DCC). Details of such proposals are required to be furnished to us for Reserve Bank of India approval as per Proforma given in Annex 7. iii) Metropolitan, Urban and Semi Urban Branches Banks are permitted to close any branch in metropolitan, urban and semi-urban centres (not assigned any responsibility under Government sponsored programme) centres without seeking prior approval from RBI. As such, these proposals should not be included in the ABEP for our approval. 4. Setting up of Off-site/Mobile ATMs - General Permission i) Scheduled Commercial Banks are permitted to install Off-site/Mobile ATMs at centres/places identified by them, including SEZs without permission from the Reserve Bank subject to the following conditions:
The ATMs installed in SEZs should deal in Indian Rupee only. This would, however, be subject to any direction which the Reserve Bank may issue, including for closure/shifting of any such Off-site/ Mobile ATMs, wherever so considered necessary by the Reserve Bank. The banks should report full details of the Off-site/Mobile ATMs installed by them in terms of the general permission to Regional Office concerned of DBS or DBOD, CO (in respect of Off-Site/Mobile ATMs in Maharashtra and Goa) immediately after operationalisation and in any case not later than two weeks, as per the format enclosed (Annex 8 and Annex 10). ii) The facilities which can be provided by banks through ATMs are as under:
The scheme of mobile branch envisages extention 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 specific days/hours. Domestic scheduled commercial banks (other than RRBs) are permitted to open Mobile branches in Tier 3 to Tier 6 centres, as also in rural, semi-urban and urban centres in North Eastern States and Sikkim without permission from Reserve Bank of India in each case, subject to reporting as per the format enclosed (Annex 9). The mobile branch should not visit villages/centres which are served by co-operative banks and places served by regular branch of commercial banks. The mobile branch should be stationed in each village/ location for a reasonable time on specified days and specified hours, so that its services could be utilized properly by customers. The business transacted at the mobile branch shall be recorded in the books of the base branch/data centre. The bank may give wide publicity about the mobile branch in the village, including details of "specified days and working hours" at various locations so as to avoid any confusion to local customers, and any change in this regard should also be publicized. In order to inform public/customers, arrangement should be made to display these details in the areas serviced by the mobile branch. 6. Setting up of Central Processing Centres/Back Offices Banks may also set up Central Processing Centres (CPCs) / Back Offices exclusively to attend to back office functions such as data processing, verification and processing of documents, issuance of cheque books, demand drafts etc. on requests received from other branches and other functions incidental to banking business. These CPCs/Back Offices should have no direct interface with customers. These CPCs/Back Offices would be termed as Service Branches and would not be allowed to be converted into General Banking Branches. Banks are permitted to open Central Processing Centres (CPCs)/Service branches in without prior permission from Reserve Bank of India in each case, subject to reporting as per the format enclosed (Annex 11 H). The proposals for opening of CPCs/Back Offices in centres where authorisation is required from the Reserve Bank (commercial banks covered under paragraph 3.2 and 3.3) should be included in the ABEP and submitted for approval to RBI. As no banking transaction is undertaken at a call centre, no permission is required for establishment of a "call centre" as defined in paragraph 2. However, details of opening, closure and shifting of call centres should be reported to RBI as provided in paragraph 12. 8. Business Facilitator/ Business Correspondent Model With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector, scheduled commercial banks including Regional Rural Banks (RRBs) and Local Area Banks (LABs) have been permitted to use the services of intermediaries in providing financial and banking services through the use of Business Facilitator/ Business Correspondent Model as per the guidelines issued in this regard. i) Guidelines for Engaging Business Facilitator Under the "Business Facilitator" model, banks may use the services of intermediaries such as: a) NGOs/SHGs b) Farmers Clubs c) Cooperatives d) Community based organizations e) IT enabled rural outlets of corporate entities f) Post Offices g) Insurance agents h) Well functioning Panchayats i) Village Knowledge Centres j) Agri Clinics k) Agri Business Centres l) Krishi Vigyan Kendras m) KVIC/KVIB units, Depending on the comfort level of the bank for providing facilitation services. Such services may include (i) identification of borrowers and fitment of activities; (ii) collection and preliminary processing of loan applications including verification of primary information/data; (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling; (iv) processing and submission of applications to banks; (v) promotion and nurturing Self Help Groups/Joint Liability Groups; (vi) post-sanction monitoring; (vii) monitoring and handholding of Self Help Groups/Joint Liability Groups/Credit Groups/others; and (viii) follow-up for recovery. ii) Guidelines for engaging Business Correspondents (BCs) The scheduled commercial banks including Regional Rural Banks (RRBs) and Local Area Banks (LABs) may engage Business Correspondents (BCs), subject to compliance with the following guidelines. Banks may formulate a policy for engaging Business Correspondents (BCs) with the approval of their Board of Directors. Due diligence may be carried out on the individuals / entities to be engaged as BCs prior to their engagement. The due diligence exercise may, inter alia, cover aspects such as (i) reputation/market standing, (ii) financial soundness, (iii) management and corporate governance, (iv) cash handling ability and (v) ability to implement technology solutions in rendering financial services. A. Eligible individuals/entities The banks may engage the following individuals/entities as BC: i) Individuals like retired bank employees, retired teachers, retired government employees and ex-servicemen, individual owners of kirana/medical / Fair Price shops, individual Public Call Office (PCO) operators, agents of Small Savings schemes of Government of India/Insurance Companies, individuals who own Petrol Pumps, authorized functionaries of well-run Self Help Groups (SHGs) which are linked to banks, any other individual including those operating Common Service Centres (CSCs); ii) NGOs/ MFIs set up under Societies/ Trust Acts and Section 25 Companies; iii) Cooperative Societies registered under Mutually Aided Cooperative Societies Acts/ Cooperative Societies Acts of States/Multi State Cooperative Societies Act; iv) Post Offices; and v) Companies registered under the Indian Companies Act, 1956 with large and widespread retail outlets, other than Non Banking Financial Companies (NBFCs). vi) In view of the general permission given to domestic scheduled commercial banks (excluding RRBs) to open branches in Tier 1 to Tier 6 centres, they may engage non-deposit taking NBFCs (NBFCs-ND) as BCs, subject to the following conditions:
B. BC Model While a BC can be a BC for more than one bank, at the point of customer interface, a retail outlet or a sub-agent of a BC shall represent the bank which has appointed the BC. However, it has now been decided to permit interoperability at the retail outlets or sub-agents of BCs (i.e. at the point of customer interface), provided the technology available with the bank, which has appointed the BC, supports interoperability, subject to the following conditions:
C. Procedure for engaging BCs The terms and conditions governing the contract between the bank and the BC should be carefully defined in written agreements and subjected to a thorough legal vetting. While drawing up agreements, banks should strictly adhere to instructions contained in the guidelines on managing risks and code of conduct in outsourcing of financial services by banks, issued by Reserve Bank of India on November 3, 2006. The banks will be fully responsible for the actions of the BCs and their retail outlets/sub agents. D. Scope of activities The activities to be undertaken by the BCs would be within the normal course of banking business. The scope of activities of a BC may include (i) identification of borrowers; (ii) collection and preliminary processing of loan applications including verification of primary information/data; (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling; (iv) processing and submission of applications to banks; (v) promoting, nurturing and monitoring of Self Help Groups/ Joint Liability Groups/Credit Groups/others; (vi) post-sanction monitoring; (vii) follow-up for recovery, (viii) disbursal of small value credit; (ix) recovery of principal/collection of interest; (x) collection of small value deposits; (xi) sale of micro insurance/ mutual fund products/ pension products/ other third party products (xii) receipt and delivery of small value remittances/ other payment instruments and (xiii) distribution of banknotes and coins. E. KYC Norms KYC and AML procedures, as laid down in the Master Circular DBOD. AML.BC. No. 11/14.01.001/2012-13 dated July 2, 2012 and subsequent circulars on the subject should be followed in all cases. The banks may, if necessary, use the services of the BC for preliminary work relating to account opening formalities. However, ensuring compliance with KYC and AML norms under the BC model continues to be the responsibility of banks. F. Customer confidentiality The banks should ensure the preservation and protection of the security and confidentiality of customer information in the custody or possession of BC. G. Information Technology Standards The banks should ensure that equipment and technology used by the BC are of high standards. H. Distance Criterion With a view to ensuring adequate supervision over the operations and activities of the retail outlet/sub-agent of BCs by banks, every retail outlet/sub-agent of BC is required to be attached to and be under the oversight of a specific bank branch designated as the base branch. The distance between the place of business of a retail outlet/sub-agent of BC and the base branch should ordinarily not exceed 30 kms in rural, semi-urban and urban areas and 5 kms in metropolitan centres. In case there is a need to relax the distance criterion, the District Consultative Committee (DCC)/State level Bankers Committee (SLBC) could consider and approve relaxation on merits in respect of under-banked areas, etc. With a view to providing operational flexibility to banks and in view of the technological developments in the banking sector, it has been decided to remove the stipulation regarding distance criteria for domestic scheduled commercial banks. These banks should, however, while formulating the Board approved policy for engaging BCs, keep in mind the objectives of adequate oversight of the BCs as well as provision of services to customers while deciding how to modify extant distance criteria. I. Ultra Small Branches For furthering financial inclusion, banks may establish outlets in rural centres from which BCs may operate. These BC outlets may be in the form of low cost simple brick and mortar structures. Every BC is under the oversight of a base branch. Accordingly, the base branch will have to provide oversight to the BC outlets which will include periodic visits by officers of the base branch to these outlets as well as to other places of functioning of BCs. With expanding access to banking services, it is also important that quality services are provided through the ICT based delivery model. Thus it would be necessary to have an intermediate brick and mortar structure (Ultra Small Branch) between the present base branch and BC locations so as to provide support to a cluster of BC units at a reasonable distance. These Ultra Small Branches may be set up between the base branch and BC locations so as to provide support to about 8-10 BC Units at a reasonable distance of 3-4 kilometres. These could be either newly set up or by conversion of the BC outlets. Such Ultra Small Branches should have minimum infrastructure such as a Core Banking Solution (CBS) terminal linked to a pass book printer and a safe for cash retention for operating large customer transactions and would have to be managed full time by bank officers/ employees. It is expected that such an arrangement would lead to efficiency in cash management, documentation, Redressal of customer grievances and close supervision of BC operations. These could be satellite offices (as envisaged in circular DBOD No. BL.BC. 72/C-168(64D)-87 dated December 14, 1987) or regular branches as the case may be. BCs can operate from such Ultra Small Branches as their association with the branch will increase their legitimacy and credibility in the area and give people increased confidence to use their services. However, banks should ensure that such an arrangement does not result in BCs limiting operations to serving customers at such branches only, if, due to geographical spread, such arrangements may lead to BC services not being easily available in the entire area of their operations. J. Payment of commission/fee The banks may pay reasonable commission/fee to the BC, the rate and quantum of which may be reviewed periodically. The agreement with the BC should specifically prohibit them from charging any fee to the customers directly for services rendered by them on behalf of the bank. Commission structure or incentive mechanism should be devised in a manner that mere increase in the number of clients served or the transaction volume does not drive the commission. The remuneration should combine fixed and variable parts dependent, inter-alia, on some indication or measure of customer satisfaction. Some part of the variable remuneration could be deferred or clawed back in case of deficiency of service. The banks (and not BCs) are permitted to collect reasonable service charges from the customers in a transparent manner. K. Transactions put through BC As engagement of intermediaries such as Business Facilitators/ Correspondents involves significant reputational, legal and operational risks, due consideration should be given by banks to those risks. The banks should adopt technology-based solutions for managing the risk, besides increasing the outreach in a cost effective manner. The transactions should normally be put through ICT devices (handheld device/mobile phone) that are seamlessly integrated to the Core Banking Solution (CBS) of the bank. The transactions should be accounted for on a real time basis and the customers should receive immediate verification of their transactions through visuals (screen based) or other means (debit or credit slip). In formulating their schemes on BC, banks may, inter alia, be guided by the recommendations made in Chapter III of the Khan Group Report as also the outsourcing guidelines released by Reserve Bank of India on November 3, 2006 (available on RBI website: www.rbi.org.in). The arrangements with the BC shall specify:
L. Internal Control & Monitoring The banks should carry out a detailed review of the performance of various BCs engaged by them at least once in a year and they should monitor the activities of BCs through their Controlling Offices and also through various fora under Lead Bank Scheme i.e. (SLBC, DCC, DLRC). The internal control mechanism in the bank should include visit to BCs and interface with customers at periodical intervals. M. Consumer Protection Measures The banks should take all measures to protect the interests of the customers. Some such safeguards are outlined below: i) The retail outlet/sub-agent of the BC should be personally introduced to the members of public by the bank officials in the presence of village elders and government functionaries in a public meeting so that there is no misrepresentation/impersonation. ii) The products and processes should be approved by the banks and the BC should not introduce any product/process without the approval of the bank concerned. iii) Each retail outlet/sub-agent may be required to post a sign in local language (vernacular) indicating their status as service providers for the bank as also disclose the name of the BC, the telephone number of the base branch/controlling office of the bank and the Banking Ombudsman and the fees for all services available at the outlet. iv) Financial services offered by the retail outlets/sub-agents of the BC should not be tied to the sale of any product of such company. v) The charges for offering various services should be indicated in a brochure and made available at the retail outlets/with the sub-agents. vi) The banks should develop suitable training modules in the local language(s) in order to provide proper attitudinal orientation and skills to the BCs/sub-agents. vii) As a measure of social audit, there could be periodic block level meetings where members of public are invited along with the BCs operating in the area as also the linked branch managers to express their difficulties and to obtain feedback. Lead District Manager (LDM) of the lead bank could attend such meetings in the district to get a direct feedback and provide such feedback to the controlling offices. viii) The bank should have necessary Business Continuity Plan (BCP) in place to ensure uninterrupted service in case the agency arrangement with the BCs/sub-agents is terminated. ix) In case a company is engaged as BC by more than one bank, it should be ensured that the customer database and account details are kept separate and there is no co-mingling of data. N. Redressal of Grievances Grievance Redressal Machinery should be constituted within the banks for redressing complaints about services rendered by the BCs and give wide publicity about it through electronic and print media. The name and contact number of designated Grievance Redressal Officer of the bank should also be made known and widely publicized. The designated officer should ensure that genuine grievances of customers are redressed promptly. The grievance redressal procedure of the bank and the time frame fixed for responding to the complaints should be placed on the bank's website. If a complainant does not get satisfactory response from the bank within 60 days from the date of his lodging the compliant, he will have the option to approach the Office of the Banking Ombudsman concerned for redressal of his grievance/s. O. Customer Education Financial literacy and customer education should form an important part of the business strategy and should form part of the commitment by banks adopting the BC model. Banks may scale up their efforts substantially towards educating their clientele in their respective vernacular languages regarding the benefits of banking habit. Information regarding BCs engaged by banks may be placed on the respective banks' websites. The Annual Report of the banks should also include the progress in respect of extending banking services through the BC model and the initiatives taken by banks in this regard. The banks may also use print and electronic media (including in the vernacular language) to give wide publicity about implementation of the BC model by them. Banks are permitted to prepare schemes for offering Doorstep Banking facilities to their customers (including individuals, Corporate, PSUs, Government Departments, etc.), with the approval of their Boards in accordance with the guidelines issued by Reserve Bank of India from time to time. i) All powers relating to hiring of premises, rentals, deposits/advances to premises owners, for acquisition of accommodation on lease/rental basis for their own use (i.e. for Office and Residence of Staff) have been delegated to banks. ii) While acquiring premises for opening of a branch, banks should ensure that the location of the branch complies with the local norms/laws of Municipal Corporation / Nagar Palika / Town area authority / Village Panchayat or any other competent authority. iii) Banks are required to forward a 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, Reserve Bank of India concerned (i.e. Regional Director of the Regional Office of RBI under whose jurisdiction the branch/office in respect of which a dispute is pending is functioning) on a quarterly basis within a period of one month from the close of the respective quarter to which the report relates. In respect of branches/offices situated in Maharashtra/Goa, the information is required to be furnished by banks to the Regional Director, Reserve Bank of India, Mumbai Office, Shahid Bhagat Singh Road, Mumbai - 400 001. 11. Population Group-wise Classification of Centres i) For the purpose of correct classification of a centre (city/town/village) i.e. rural, semi urban, urban or metropolitan, the bank should mention the correct name of the revenue centre and not just the locality. For this purpose, clarification can also be obtained from the Block Development Officer, Village Panchayat, Tehsildar / Municipality or Municipal Corporation Office / Office of the District Collector or District Census Authority. Further, banks may also ascertain the population group-wise classification of the centre from the Department of Statistics and Information Management (DSIM), Banking Statistics Division, Reserve Bank of India, Central Office, C-8/9, Bandra-Kurla Complex, Mumbai-400 051, before approaching DBOD, CO with their ABEP proposals. ii) In the event of change in population category of a centre on account of re-allocation/reorganisation of villages/centres among districts or on account of amalgamation of towns/villages/areas, Head Offices / Corporate Offices of the banks should approach Department of Statistics and Information Management (DISM), , Banking Statistics Division, Reserve Bank of India Central Office, C-8/9, Bandra-Kurla Complex, Mumbai-400051, regarding changes / reclassification of centre / place / district, etc. along with all relevant documents (Gazette Notification, etc.) received from the State Government / Municipal Corporation / Nagar Palika / Town area authority / Village Panchayat or any other competent authority evidencing the changes. 12. Reporting to Reserve Bank of India i) Reporting to Regional Offices/DBOD, CO Banks should report details of opening of a new place of business including Mobile branch/Mobile ATMs, closure, merger, shifting or conversion of any existing place of business immediately and in any case not later than two weeks after opening/closure/merger/shifting/conversion to the Regional Office concerned of DBS except in respect of branches in Maharashtra and Goa, which should be reported to DBOD, CO, Mumbai. The banks should also report the details of opening, closure and shifting of call centres to Regional Office concerned of DBS, or DBOD, CO (in respect of call centres in Maharashtra & Goa). ii) Branch Banking Statistics Banks should submit within fourteen days of every quarter, information relating to opening, closure, merger, shifting and conversion of branches in Proformae I & II (Annex 9) to Department of Statistics and Information Management, Banking Statistics Division, Reserve Bank of India, Central Office, C-8/9, Bandra-Kurla Complex, Mumbai-400 051 and the Regional Office concerned of DBS or DBOD, CO (in respect of centres in Maharashtra & Goa). Further, information in respect of change in status of Authorised Dealer (AD) branches should be submitted on an ongoing basis. A 'Nil' statement must be submitted in case there is nothing to report. iii) Banks should report operationalisation of Mobile Branches/Offices and Mobile ATMs in the Proformae III & IV (Annex 10). List of Circulars consolidated by the Master Circular
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