What changed
RBI liberalised branch licensing for RRBs, permitting them to open branches in Tier 3 to Tier 6 centres (population up to 49,999 as per Census 2001) without prior RBI permission, subject to reporting. This replaces the earlier requirement of case-by-case approval. The relaxation is conditional on the RRB meeting specific financial health criteria as per the latest inspection report.
What it means for you
For RRBs that meet the conditions, this reduces regulatory burden and speeds up branch expansion in smaller towns and rural areas. It encourages deeper financial inclusion in underserved centres. RRBs not meeting the criteria must still seek prior approval from RBI or NABARD. After September 30, 2011, only fully CBS-compliant RRBs will enjoy this liberalisation.
What you must do
- Check your RRB's latest inspection report to confirm CRAR ≥9%, net NPA <5%, no CRR/SLR default in last year, and net profit in last financial year.
- If conditions are met, proceed to open branches in Tier 3-6 centres without prior RBI approval, but ensure proper reporting to RBI.
- If conditions are not met, continue to approach RBI or NABARD for branch opening permissions as before.
- Ensure full CBS compliance by September 30, 2011 to retain this liberalisation benefit beyond that date.
Who it affects
Regional Rural Banks (RRBs), NABARD, Rural and semi-urban banking customers
Which centres are covered under this relaxation?
Tier 3 to Tier 6 centres as per Census 2001, i.e., centres with population up to 49,999. Tier 3: 20,000-49,999; Tier 4: 10,000-19,999; Tier 5: 5,000-9,999; Tier 6: less than 5,000.
What happens if an RRB does not meet the conditions?
Such RRBs must continue to seek prior permission from RBI or NABARD for branch openings, as was the practice before this circular.
Is there a deadline for CBS compliance related to this?
Yes, after September 30, 2011, the liberalisation will be available only to RRBs that are fully CBS compliant.