RBI might allow banks to decide on branches

The Reserve Bank of India (RBI) may leave it to banks to open branches in rural and semi-urban centres. This step might be taken as a step towards liberalising its branch authorisation policy.

One of the major criteria for this will be the flow of credit to the small and medium businesses in the urban and semi urban areas and also the credit flow to the rural areas to ensure that it does not get concentrated only in the urban areas.

If the de-licensing happens it will no longer be compulsory for a bank to open branches in rural and semi urban centers to boost its application to get a license to open more branches in urban or high-income areas.

Presently, a bank has to take permission to open branches anywhere. Also RBI maintains a ratio of urban centre branches to rural/semi-urban ones which means a single branch in an urban area will require a certain number of branches to be opened in rural and semi-urban areas.