What changed
RBI permitted domestic scheduled commercial banks (excluding RRBs) to open branches in Tier 3 to Tier 6 centres (population upto 49,999 as per 2001 Census) without prior approval, only requiring reporting. Similar general permission was granted for rural, semi-urban, and urban centres in North Eastern States and Sikkim. Tier 1 and Tier 2 centres (population 50,000 and above) still need prior RBI permission, except in North Eastern States and Sikkim.
What it means for you
Banks can now expand more freely into smaller towns and rural areas, reducing bureaucratic delays. However, at least one-third of new branches in Tier 3-6 centres must be in underbanked districts of underbanked states. RBI retains the right to withhold this general permission on a case-by-case basis based on regulatory comfort, financial inclusion performance, and customer service.
What you must do
- Plan branch expansion in Tier 3-6 centres and underbanked districts to meet the one-third requirement.
- Report all new branch openings and conversions to specialised branches as per existing reporting system (Master Circular on Branch Authorisation, July 1, 2009).
- Ensure continued service to existing customers when converting general banking branches to specialised branches.
- Apply for prior RBI permission for branches in Tier 1 and Tier 2 centres (except in North Eastern States and Sikkim).
Who it affects
Domestic scheduled commercial banks (excluding RRBs), Banks planning expansion in Tier 3-6 centres, Banks operating in North Eastern States and Sikkim, Banks converting general branches to specialised branches
Do we need RBI approval for every branch in Tier 3-6 centres?
No, RBI has granted general permission for domestic scheduled commercial banks (excluding RRBs) to open branches in Tier 3-6 centres (population upto 49,999 as per 2001 Census) without prior approval, subject to reporting. However, RBI may withhold this permission on a case-by-case basis.