DBOD.No. BL.BC.74/22.01.001/98

July 29, 1998
Shravana 7, 1920 (Saka)

All Indian Scheduled Commercial Banks (excluding Regional Rural Banks)

Dear Sir,

Section 23 of the Banking Regulation Act, 1949-Shifting of rural branches outside the Block/Service Area and closure of rural branches

Please refer to our Circular DBOD No. BL.BC. 132/22.01.001/92 dated 20th May 1992. In terms of paragraph 3(I) thereof, banks are free to shift their branches at rural/semi-urban centres without obtaining prior approval of Reserve Bank of India, subject to the conditions that the existing and the proposed centres are within the same Block and Service Area and the relocated branch would be able to cater adequately to the banking needs of the villages allocated under the Scheme of Service Area Approach. Banks are also aware that the shifting of rural branches outside the Block/Service Area is being allowed by us on the basis of approval of such proposals by the District Consultative Committee and the State Government (Directorate of Institutional Finance). The matter has been reviewed by us and it has now been decided that the shifting of rural branches outside the Block/Service Area may be allowed by Reserve Bank of India without insisting on the approval of DCC and State Government in the following cases:

(i)    Branches which are in existence for five years or more and are incurring losses continuously for the last three years.

ii) Branches located at centres suffering from problems beyond control of the banks, such as, prone to floods, land slides or likely to be sub-merged in waters due to construction of dams, or having underground fires, etc.

(iii) Shifting is necessitated on account of law and order problem or terrorists' activities posing threats to bank property/staff members.

(iv) Cases where the branch premises are in a dilapidated condition or burnt/destroyed and no suitable premises are available at the centre/Block/Service Area.

2. Further, in terms of Circular DBOD No. BL.BC. 152/22.01.001/93 dated 24th August 1993, closure of loss-making branches at rural centres is not permissible if there is a single commercial bank branch (excluding RRBs) at the centre. However, at rural centres served by two or more commercial bank branches (excluding RRBs), decision for closure of one of the branches may be taken by the concerned banks by mutual consultation and the same is allowed by us subject to approval of the proposal by the District Consultative Committee and routing of the same through the concerned State Government (DIF). It has now been decided to allow closure of loss-making rural branches without involving State Government and DCC. However, the banks will have to themselves settle the other matters, such as, transfer of assets and liabilities of the branch proposed to be closed, to other branches of the same bank or different bank, re-allocation of villages under Service Area Approach, redeployment of staff, etc.

3. It has also been decided that the permission for shifting and closure of loss-making rural branches will hereafter be given by the Chief General Manager/General Manager-in-Charge of the concerned Regional Office of Reserve Bank of India.

Accordingly, banks are advised to submit their proposals in this regard, duly approved by their Boards of Directors, to the concerned Regional Office of Reserve Bank of India under whose jurisdiction the centre falls, for prior approval.

Yours faithfully,

(O.P. Agarwal)

General Manager