What changed
Earlier, RRBs could open branches in Tier 3 to 6 centres without prior RBI permission. Now, this automatic route is extended to Tier 2 centres (population 50,000-99,999 as per Census 2001). RRBs meeting specified financial and operational conditions can open branches in Tier 2 centres without seeking prior RBI approval, only reporting post-facto.
What it means for you
This relaxation significantly reduces the regulatory burden for well-performing RRBs, enabling faster branch expansion in semi-urban areas. It supports financial inclusion by easing access to banking in Tier 2 centres. Banks must ensure they meet the eligibility criteria and submit quarterly reports to the concerned RBI Regional Office within a fortnight of quarter-end.
What you must do
- Verify your RRB meets all conditions: CRAR ≥9%, net NPA <5%, no CRR/SLR default in last year, net profit in last financial year, and CBS compliance.
- Open branches in Tier 2 centres without prior RBI approval, but maintain records for post-facto reporting.
- Submit a quarterly report within 15 days of quarter-end to the concerned RBI Regional Office using the format from circular RPCD.CO.RRB.BC.No.56/03.05.90A/2011-12 dated March 29, 2011.
- Apply to the RBI Regional Office for post-facto automatic issue of branch licence and display it at the branch premises.
Who it affects
Regional Rural Banks (RRBs), RBI Regional Offices, NABARD
What are the eligibility conditions for RRBs to open branches in Tier 2 centres without prior permission?
RRBs must have CRAR of at least 9%, net NPA less than 5%, no default in CRR/SLR for the last year, net profit in the last financial year, and be CBS compliant as per the latest inspection report.
Do RRBs still need RBI permission for Tier 1 centres?
Yes, opening branches in Tier 1 centres (population 100,000 and above as per Census 2001) continues to require prior permission from RBI.
What reporting is required after opening branches in Tier 2 centres?
A report with details of branches opened in Tier 2 to 6 centres must be submitted within a fortnight of the end of the quarter to the concerned RBI Regional Office, using the format from the March 29, 2011 circular.