RBI has allowed free bank branching for well managed domestic scheduled commercial banks in every part of the country subject to fulfilling certain inclusion criteria in under served areas in proportion to their expansion in urban areas.RBI new governor Dr Raghuram Rajan in his inaugural speech has shown intend to issue instruction regarding opening of Bank Branch by Banks without the approval of RBI.
RBI governor has take action quickly and issue the basic instructions With in 15 days from taking his charge.In last 15 days RBI has taken many pro active steps and due to this many things are improving . Rupees vs dollar has improved by around 10 % after his joining as Chief of RBI.
Extract of Statement by Dr Raghuram Rajan on taking office on September 04, 2013
The Indian public would benefit from more competition between banks, and banks would benefit from more freedom in decision making. The RBI will shortly issue the necessary circular to completely free bank branching for domestic scheduled commercial banks in every part of the country. No longer will a well-run scheduled domestic commercial bank have to approach the RBI for permission to open a branch. We will, of course, require banks to fulfil certain inclusion criteria in under served 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. But branching will be free for all scheduled domestic commercial banks except the poorly managed.
This step will be very beneficial for General Public as well.
- Banking service's reach will increase ,which will be helpful for general public.
- More bank Branches means easy, hassle free operation in branches.
- More Bank branches means increase in competition among banks ,which leads to improvement in services and lowering in costs.
- Government can implement direct cash benefit scheme in new areas ,which will reduce middlemen intervention and benefit will reach to the right persons.
- Helps in achieving Inclusive growth agenda.
- Earlier Banks were allowed to open branches in Tier 2 to Tier 6 centres and in the rural, semi-urban and urban centres in North-Eastern States and Sikkim without having the need to take permission from Reserve Bank of India in each case, subject to reporting.
- With the objective of further liberalising and rationalising the branch authorisation policy, the general permission to domestic scheduled commercial banks (other than RRBs) is now extended to branches in Tier 1 centres also, subject to the following:
- a) At least 25 percent of the total number of branches opened during the financial year (excluding entitlement for branches in Tier 1 centres given by way of incentive as stated in para 4 below), must be opened in unbanked rural (Tier 5 and Tier 6) centres, i.e. centres which do not have a brick and mortar structure of any scheduled commercial bank for customer based banking transactions.
- b) The total number of branches opened in Tier 1 centres during the financial year (excluding entitlement for branches in Tier 1 centres given by way of incentive as stated in para 4 below) cannot exceed the total number of branches opened in Tier 2 to 6 centres and all centres in the North Eastern States and Sikkim.