RBI releases report of IWG on Rationalisation of Branch Authorisation Policy

Posted on:07 Oct 2016 09:22:12
RBI releases report of IWG on Rationalisation of Branch Authorisation Policy
07 October 2016 Current Affairs: The Reserve Bank of India (RBI) has released the Report of the Internal Working Group (IWG) on Rationalisation of Branch Authorisation Policy on 6 October 2016. The Group is chaired by Lily Vadera, Chief General Manager, Department of Banking Regulation.

The thrust of the recommendations is to facilitate financial inclusion by ensuring availability of banking services in all centers through low cost delivery channels and mapping the footprints of various banking channels.

Recommendations of the IWG : In the first phase, the recommendations focus on broadening of the current framework to include all banking outlets which are fixed point locations and bring them on par with branches.

A banking outlet is defined as a fixed point service delivery unit manned by bank’s staff or its Business Correspondent where services of acceptance of deposits, encashment of cheques/cash withdrawal or lending of money are provided for minimum 4 hours per day for at least five days a week. 

Banks need to open banking outlets to meet the 25 percent norms of opening banking outlets in unbanked rural centres that does not have a CBS-enabled banking outlet of a Scheduled Commercial Bank.

A part-time banking outlet opened in any Centre will be added to the denominator as well as numerator on pro rata basis for computing the compliance with the norm of opening 25% banking outlets.

A banking outlet opened in North-Eastern States, Sikkim and in Left-Wing Extremism Affected Districts will be treated as a banking outlet/part-time banking outlet in an unbanked rural centre.

Grandfathering of MFI/NBFC structures of Small Finance Banks to be provided to facilitate an orderly transformation and to minimize the risk of transition. As regards their existing NBFC/MFI branches, banks will be given a time period of 3 years to close or convert these into banking outlets.

The Boards of the banks should set internal financial inclusion targets and compile the data to monitor the transactions to ensure that target customers for financial inclusion are getting the banking facilities in unbanked rural centres. In the second phase, a new data system will be devised which is capable of capturing the locations and transactions carried out by all banking outlets. 

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