RBI to liberalise branch licencing policy

KOLKATA: Reserve Bank of India's new governor Raghuram Rajan said the central bank would liberalise branch licencing policy and allow strong local banks to open branches freely with fulfilling some financial inclusion criteria.

"No longer will a well-run scheduled domestic commercial bank have to approach the RBI for permission to open a branch," Rajan said in his first media interaction in Mumbai. A copy of his address to the media is available on RBI website.

At present, banks submit a branch expansion plan in the beginning of every year. However, RBI allowed banks to open branches in rural and unbanked areas without prior clearance to push banking penetration.

Rajan said RBI would shortly issue the necessary circular to completely free bank branching for domestic scheduled commercial banks in every part of the country. However, weak banks will not get such liberty.

"We will, of course, require banks to fulfil certain inclusion criteria in underserved areas in proportion to their expansion in urban areas, and we will restrain improperly managed banks from expanding until they convince supervisors of their stability," he said.