What changed
RBI issued a master circular consolidating all existing instructions on branch licensing for RRBs, including legal requirements, conditions for opening branches, shifting, conversion, and ATMs. It mandates prior RBI approval under Section 23 of the Banking Regulation Act, 1949, and requires RRB Board approval before applying. Applications go to NABARD with a copy to RBI, and Empowered Committees recommend decisions.
What it means for you
RRBs now have a single reference document for branch licensing, simplifying compliance but reinforcing strict prior approval requirements. Banks must ensure Board-level strategic planning for branch expansion and adhere to prescribed application procedures. This reduces ambiguity but increases accountability for timely submissions and adherence to policy.
What you must do
- Ensure Board approval is obtained before any branch opening, shifting, merger, or conversion application.
- Submit applications in Form VI to the respective NABARD Regional Office with an advance copy to RBI's Regional Office.
- Review and align internal branch expansion policies with the master circular's conditions, including profitability and internal control assessments.
- For shifting/merger/conversion, also secure approval from the sub-group of District Consultative Committee.
Who it affects
Regional Rural Banks (RRBs), Sponsor Banks of RRBs, NABARD Regional Offices, RBI Rural Planning and Credit Department (RPCD)
Do RRBs need separate approval from the sponsor bank for branch licensing?
No, the master circular states that no separate approval from the sponsor bank is required for opening branches.
What is the role of the Empowered Committee in branch licensing?
The Empowered Committee, constituted by RBI at its Regional Offices, deliberates on applications and makes recommendations, which RBI considers for disposal.
Is DCC approval needed for opening new branches?
No, approval of the sub-group of District Consultative Committee is not required for opening branches, but it is needed for shifting, merger, or conversion.