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Rationalised
In accordance with the announcement made in the first Bi-monthly Monetary Policy Statement 2016-17, an Internal Working Group on Rationalisation of Branch Authorisation Policy was constituted by the RBI.

ITS REPORT WAS released in October recommending the liberalisation of the branch licensing policy. The Working Group has emphasised the need for further rationalisation of the branch licensing policy in tune with the rapid changes that have taken place in the diversified nature of bank branches. “With a view to facilitating financial inclusion and providing operational flexibility on the choice of delivery channel, it was considered necessary 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,” explained in the preamble of the Report.

Redefining banking outlets:

Thanks to some of the ad hoc decisions relating to branch expansion, the banking sector has several branches including those of the ‘branchless banking model.’ There are three lakh services outlets under this model, while the total number of brick and mortar branches is 134,014 as on June 2016. Besides, there are 211,914 ATMs.

The new definition of banking outlet is “a fixed point service delivery unit, where services of acceptance of deposits, encashment of cheques, cash withdrawal or lending are provided for at least  4 hours per day for five days a week. It carries uniform signage with name of the bank, contact details of the controlling authorities and complaint escalation mechanism.” Any delivery unit of the bank, not complying with the above prescriptions will be considered a ‘part-time banking outlet.’

Rural-orientation continues to be a key tune. Banks are required to ensure that 25 per cent of the new branches are opened in unbanked rural centres. The policy statement defines the unbanked rural centre as one “where no other CBS-enabled bank carrying out customer based banking transactions,” exists.


Realigning the branches of small finance banks

The Report has asserted the need for realigning the branches of the small finance banks and as well as the non-banking financial institutions entering into the banking field. It said: “grandfathering of MFI/NBFC structures of Small Finance Banks to be provided to facilitate an orderly transformation and to minimize the risk of transition. The existing network of these entities would be frozen as on the date of their getting ‘licence’ for the bank.” Within a year of commencement of business, these banks are required to comply with the norm of opening 25 per cent of the banking outlets in unbanked rural centres. In order to prompt the new banks to extend their business network into the north-eastern states, they are permitted to open their banking outlets anywhere in these states, not necessarily in the unbanked centres only. 

 

Improving the data base

 About the future pattern of branch management, the Report has made an important recommendation. A new data system may be devised by the banks “which is capable of capturing the locations and transactions carried out by all banking outlets including mobile business correspondents and non-fixed locations and services rendered through the ‘hub and spoke’ models which will aid in capturing the degree and level of financial inclusion and will be useful for future policy reviews.”  Another innovative suggestion is that “the data needs to be GIS mapped to enable getting a complete picture of banked and unbanked centres on the country’s map, at all times.”

    In addition to this it is also recommended that “the banks should set internal financial inclusion targets and collate and compile tier-wise/center-wise data and monitor the transactions in these outlets to ensure that banking services are being transacted.

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