In a notification published on its website, RBI said that banks can “shift, merge or close all branches except rural branches and sole semi-urban branches at their discretion”. 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 the RBI, the notification in the website said.

This is the second major reform in how RBI regulates the branches in India after 2013, when it permitted banks to open branches in tier 1 to tier 6 cities without seeking its prior permission.

The notification has also allowed the banks to shift some activities from a branch, due to space or rental constraints without seeking RBI’s permission. Banks no longer required to report details of opening new mobile branches, automated teller machines (ATMs) or call centres. Closure, merger, shifting or conversion of any of the above places of business need no longer to be reported by the banks except to the Department of Banking Statistics of RBI.

"Banks may shift their metropolitan, urban and semi urban branches outside the State, and their rural branches outside the block without prior approval of RBI."

“However, it may be noted that banking activity, that is, deposit or loan business, cannot be maintained at both places, and the new location for part-shifting would have to be within 1 km of the existing location. They (banks) may also spin off certain activities such as government business into separate branches at their discretion,” RBI said.

“Further, while considering shifting / merger / closure of branches, banks should ensure that they continue to fulfil the role entrusted to these branches under government-sponsored programmes and direct benefit transfer schemes,” RBI said.

While shifting / merging / closing the sole rural or semi urban branches, banks have to ensure that the banking needs of the centre continue to be met through either satellite offices or mobile vans or through business correspondents. "Thus the centre should not be left unbanked."

By Premji