RBI allows banks to merge, shift or close branches in Urban areas

          The RBI has now allowed banks to shift, merge or close branches in urban areas without seeking its prior permission. Rural branches outside the block can also be shifted without prior approval of RBI. However shifting, merging or closing a branch in a rural area or a sole branch in a semi-urban area would continue to require prior permission from RBI.

• As per the new guidelines, banks are also no longer required to report details of opening new mobile branches, automated teller machines (ATMs) or call centres. This will also allow banks to shift some activities from a branch due to space or rental constraints without seeking RBI’s permission. So ultimately this will facilitate banks greater operational freedom.
• As per RBI’s direction, banking activity i.e. deposit or loan business, cannot be maintained at both the places, and the new location would have to be within 1 km of the existing location. Also banks must ensure that customers of the branch are informed well in time before shifting, merging or closing so as to avoid inconvenience to them. Further, while considering shifting, merger or closure of branches, banks should ensure that they continue to fulfill the role entrusted to these branches under the Government sponsored programmes and DBT Schemes.
• In the rural and semi-urban areas the needs of the customers must be met through mobile vans or business correspondents if the bank decides to shut the branch there. The backbone condition during shifting is that banks have to ensure that branches are shifted within the same or to a lesser population category i.e. semi-urban branches to semi-urban or rural centres and rural branches to other rural centres.
• All the changes will be done as per Section 23 of the Banking Regulation Act, 1949 -Relaxations in Branch Authorization Policy.