What changed
RBI proposed shifting from processing individual branch license applications to granting annual aggregated approvals based on banks' medium-term strategies. The new policy emphasizes financial inclusion, priority sector credit, customer service, and regulatory compliance over mere procedural checks.
What it means for you
Banks now need to integrate branch expansion with broader goals like serving underbanked areas and offering no-frills accounts. Annual approvals reduce paperwork but require robust internal systems to demonstrate compliance. Non-compliance with spirit of regulations could limit expansion.
What you must do
- Develop a medium-term branch expansion strategy covering all office types including ATMs, to the extent possible.
- Strengthen financial inclusion efforts: offer no-frills banking services, improve priority sector lending.
- Enhance customer service and complaint redressal mechanisms.
- Ensure group-wide regulatory compliance and risk management systems.
- Engage in consultative discussions with RBI for annual approval.
Who it affects
All scheduled commercial banks (excluding RRBs), Bank branch planning and strategy teams, Compliance and risk management departments
What is the validity of the annual branch authorisation?
The annual approval is valid for one year from the date of communication by RBI.
Does this policy apply to overseas branches?
No, the existing policy for overseas branches of Indian banks continues unchanged.
What factors will RBI consider for branch approvals?
RBI will assess financial inclusion efforts, priority sector credit, customer service quality, pricing, technology use, and regulatory compliance including group activities.