Licence to open bank branches may go

The mandatory licensing requirement for Indian banks to open branches may be done away with. The department of financial services is taking up the matter with the Reserve Bank of India (RBI) as banks are no more shying away from opening branches in semi-urban and rural areas. The likely relaxation, however, will not apply to foreign banks. “There is a case made out for dispensing with the mandatory licensing requirement with certain transparent safeguards to ensure an equitable distribution of bank branches in the urban and rural areas,” an official source said. RBI might make it mandatory for banks to open one rural or semi-urban branch for every new urban branch that is opened, added the source. Citing a recent speech of RBI Governor Y V Reddy that “many banks now find that branches in semi-urban and rural areas are also commercially viable”, official sources said the entire policy followed by RBI on opening new branches needed to be revisited. Many public and private sector banks have been demanding the removal of the licensing system, which comes in their way to expand organically in a rapid manner. The department has sought views from public sector bank chiefs in this regard.