What changed
RBI reiterated the existing policy that prior approval is not required for opening branches in all tiers (Tier 1 to 6), replacing it with a reporting-only regime. Banks are mandated to open at least 25% of all new branches (excluding incentive-based Tier 1 branches) in unbanked rural centres each year. Incentives are provided for opening branches in underbanked districts of underbanked states.
What it means for you
Banks can now expand their branch networks more quickly and flexibly without waiting for RBI clearance, reducing administrative delays. The 25% mandate for unbanked rural centres pushes banks to deepen financial inclusion, especially in underserved areas. This policy encourages banks to focus on underbanked regions by offering incentives, potentially improving rural credit access and deposit mobilization.
What you must do
- Review and update internal branch expansion plans to align with the new reporting-only framework.
- Ensure at least 25% of all new branches opened annually (excluding incentive-based Tier 1 branches) are in unbanked rural centres (Tier 5 and 6).
- Identify underbanked districts (APPBO above national average) and prioritize branch openings there to avail incentives.
- Set up robust reporting mechanisms to comply with RBI's submission requirements for new branches.
- Train branch planning teams on the revised tier definitions and compliance obligations.
Who it affects
Domestic scheduled commercial banks (excluding RRBs), Branch planning and expansion teams, Compliance and reporting departments, Rural and semi-urban banking operations
What is the definition of an unbanked rural centre under this policy?
An unbanked rural centre is a location that does not have any brick-and-mortar branch of a scheduled commercial bank for customer banking transactions. Banks must open at least 25% of new branches (excluding incentive-based Tier 1 branches) in such centres annually.