What changed
RBI observed that some banks failed to comply with existing instructions on acquiring premises on lease/rental basis for branches. This circular reiterates the need for strict adherence to Board-approved policies and local municipal laws, reinforcing earlier 1998 and 2012 guidelines.
What it means for you
Banks must tighten internal controls on branch premises acquisition to avoid regulatory action and reputational damage. Non-compliance with local zoning or municipal laws could lead to branch closures or customer disruptions, impacting operational continuity and brand trust.
What you must do
- Review and reinforce Board-approved policy on lease/rental acquisition for all branch premises.
- Ensure every new branch location is verified for compliance with local municipal, panchayat, or town authority norms.
- Audit existing branch premises to identify any non-compliant locations and take corrective action.
- Document delegation of powers and approval processes for lease agreements at all levels.
Who it affects
All commercial banks (excluding RRBs), Branch expansion and administration teams, Board of Directors and senior management
What triggered this circular from RBI?
RBI observed instances where banks did not follow their own Board-approved policies or local municipal laws while leasing premises for branches, causing customer inconvenience and reputational risk.
Does this circular introduce new rules?
No, it reiterates existing instructions from 1998 and 2012, emphasizing strict compliance with Board policies and local authority norms for branch premises.
What should banks do if they find non-compliant branches?
Banks should take corrective action, which may include relocating the branch or regularizing the premises with local authorities, to avoid regulatory or reputational issues.