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