Rationalization Of Branch Authorization Policy For Urban Co-Operative Banks (UCBS)

Recently, the Reserve Bank of India (RBI) announced changes to its Urban Co-operative Banks (UCBs) branch authorization policy.  The new policy places a focus on universal branch growth power, an expedited approval procedure, and reporting requirements. Under the new regulatory framework for UCBs, financially sound UCBs are given general authorization for branch growth in their authorized operating territory. Making the branch opening process more efficient, this is meant to aid UCBs in expanding.

UCBs that satisfy the appropriate Financially Sound and Well Managed (FSWM) requirements are eligible for this general license. Qualified UCBs must create a policy that has been authorized by their Board of Directors in order to receive general approval. The soundness of the bank’s finances, the potential for opening new branches, and customer satisfaction should all be considered in this policy. UCBs are permitted to open up to 10%, or a maximum of five branches, of the full-fledged branches they had at the end of the preceding fiscal year without requesting permission from the RBI.

Regular updates are required to the policy to reflect evolving RBI guidelines. Along with the general authorization, the current process for prior approval of branch expansion for other qualified UCBs will continue to be used. To expedite the time it takes to give authorization, the approval procedure has been streamlined.

UCBs are required to file an Annual Business Plan (ABP) before opening branches, extension counters, or upgrading extension counters to full-fledged branches. The revised deadlines guarantee that UCBs can establish branches during the same fiscal year as their authorization. Within 15 calendar days following the establishment of a branch, UCBs are required to notify the appropriate Regional Office of the Department of Supervision and submit the necessary information via the Central Information System for Banking Infrastructure (CISBI) portal.

The rationalization of the Reserve Bank of India’s branch permission policy for Urban Co-operative Banks aims to promote expansion possibilities and simplify the branch establishment process. Financially sound UCBs will be able to reach their full potential thanks to the comprehensive authorization for branch expansion, as well as the simplified approval procedure and reporting requirements. UCBs should align their policies with the updated standards and adhere to the deadlines in order to encourage orderly and effective branch expansion. This legal change is anticipated to help UCBs grow and contribute to the growth of the co-operative banking sector.

Technical Details related to Rationalization of Branch Authorization Policy for Urban Co-operative Banks (UCBs) are detailed mentioned in the Notification dated 08.06.2023 bearing No. 19/07.01.000/2023-24 issued by Reserve Bank of India.

Link for the Notification:[1]

[1] https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOTI39080623DAEB356F5E84423D85FC7FDC3733FE14.PDF