RBI revises definition of what constitutes a bank branch
By Team Legistify / 2017-05-20

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The Reserve Bank of India (RBI) on Thursday relaxed the branch authorization policy, bringing all branches and fixed business correspondent outlets under the definition of banking outlets and removing restrictions on opening branches in Tier 1 centres.

According to the revised policy, RBI has defined “a banking outlet” for a scheduled commercial, a payments bank or a small finance bank as a fixed point service delivery unit, manned by either the bank’s staff or its business correspondent, where services of acceptance of deposits, encashment of cheques, cash withdrawal or lending of money are provided for a minimum of 4 hours per day for at least five days a week”. Those outlets which do not meet this criteria will be called “part-time banking outlet.”

While the policy has removed restrictions on opening banking outlets in Tier 1 to Tier 6 centres without taking RBI’s permission in each case, the regulator has mandated that banks open 25% of these outlets in unbanked rural centres (URC). Under the revised policy, a URC is defined as a “rural (Tier 5 and 6) centre that does not have a core banking system (CBS)-enabled ‘banking outlet’ of a scheduled commercial bank, a small finance bank, a payment bank or a regional rural bank nor a branch of local area bank or licensed co-operative bank for carrying out customer based banking transactions”.

With the expansion in definition of a branch, RBI has allowed all extension counters, satellite offices, part-shifted branches, ultra small branches and specialized branches, to be treated as ‘banking outlets’ or ‘part-time banking outlets’. However, ATMs, E-lobbies, bunch note acceptor machines ,cash deposit machines, e- kiosks and mobile branches will fall outside the purview of “banking outlets”. This is a shift from the earlier definition of a “branch” which also included off-site ATMs.

The proposal to rationalise the branch authorization policy was introduced under former RBI governor Raghuram Rajan in the April 2016 monetary policy. “With a view to facilitating financial inclusion and providing flexibility on the choice of delivery channel, it is proposed to redefine branches and permissible methods of outreach, keeping in mind the various attributes of the banks and the types of services that are sought to be provided,” RBI had said in the policy statement.

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