RBI plans rework of bank branch norms
Central bank seeks to widen definition of a branch to make it easier for banks to meet the norm of opening 25% banking outlets in unbanked rural centres
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The Reserve Bank of India (RBI) has proposed widening the definition of a branch to make it easier for banks to meet the norm of opening 25% banking outlets in unbanked rural centres. An internal working group report released on Thursday said that banks would be allowed to treat so-called banking outlets on par with branches.
A banking outlet has been defined as a manned service delivery point which is open for at least four hours a day for at least five days a week. It should also provide the whole range of services that a regular branch offers, such as deposits, encashing cheques, cash withdrawal and lending.
Bankers welcomed the RBI move.
“The initial delivery model was a huge burden. The new recommendations will bring down the cost of financial inclusion through business correspondents,” said Rajnish Kumar, managing director for national banking at State Bank of India.
New banks such as IDFC Bank Ltd are focusing on micro ATMs which are part of a banking outlet and offer the whole suite of services.
“With technology coming up, full fledged branches just escalate costs for the banks. From the cost of delivery perspective, it is a good move,” said Abizer Diwanji, partner and head of financial services at consulting firm EY.
The RBI working group has also proposed that banking outlets opened in the north-eastern states, Sikkim and in left-wing extremism-affected districts would count towards the 25% norm. Separately, the working group said that any banking outlet opened by the small finance banks either by converting existing outlets or opening new ones should comply with the 25% norm within one year of commencement of business.