Shifting of Branches by Cooperative Banks RBI Approval

Narendra Kumar

03 Dec, 2020

Cooperative banks are small-sized units which are organized in the co-operative sector of urban and non-urban centers. Co-operative banks can be established its branches in accordance with the Rules. The economic developmental process gets accelerated when more areas are brought under the ambit of the banking network.

Banks do business through branches. The opening of branches gives bank entree to the untapped, unexplored, unexploited and virgin areas. It has a direct impact on the performance of a bank. It also helps in enhancing the brand image of the bank.

Structure of Cooperative Banking

The cooperative Bank structure in India can be divided into 2 broad segments-

1. Urban Cooperative Banks.
2. Rural Cooperative Banks.

Who acts as the regulator for co-operative banks?

Co-operative banks are regulated by the Reserve Bank of India (RBI). The Banks are governed by the Banking Regulations Act, 1949^[1], and Banking Laws – Co-operative Societies Act, 1965. Rural co-operative banks are regulated by the state registrar of co-operatives.

What are the objectives of Cooperative Banks?

• Engage in rural financing and micro-financing.
• The main objective is to remove the dominance of a common man by the middleman and money lender.
• Finance small borrowers in the industrial and trade sectors, besides professional and salary classes.
• Ensure credit services to farmers at the low rate of interest providing socio-economic conditions to people.
• Provide financial support for the needy people and farmers in the rural area.
• Provide personal financial services for those engaged in small-scale industries and self-employment drove activities for people in the rural area as well as in urban areas.

License from RBI for Cooperative Banks

The co-operative society shall carry on banking business in India unless it holds a license issued by the Reserve Bank, subject to such conditions if any, as the Reserve Bank may deem fit to impose

Branches of Cooperative Banks

Co-operative Banks may open any new place of business after obtaining the prior permission of the Reserve Bank.

Any change in the place of business shall also require prior permission of the Reserve Bank except change is within the same city, town or village, the location of an existing place of business.

The prior permission of RBI would not be required in case of below:

• Any new opening is for a period up to one month of temporary place of business within a city, town or village or the environs thereof within which the co-operative bank already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a MELA or any like occasion;
• Any new opening or change thereon in the location of branches by a Central co-operative bank within the area of its operation
• Cooperative Bank opening or shifting any branch shall within its area of operation not require prior RBI approval.
• Where RBI’s prior approval is not required, the Report in the prescribed format should be submitted in duplicate to the Regional Office concerned of this Department within a month from the date of shifting.

Shifting branches from one city to another: Prior RBI approval

The requests to shift their branches from one city to another in their area of operation within the same State will be considered subject to their compliance with the following conditions:

• The new center is of the same or lower population group as the existing center e.g. a branch at a ‘D’ center can be shifted to another ‘D’ center only; and
• A branch located can be shifted to another center district only. The shifting should be beneficial to the bank in terms of cost and business.

Application to RBI for approval

In case of shifting is covered under approval routes:

Co-operative bank other than a primary co-operative bank requiring the permission of the Reserve Bank under this section shall forward its application to the Reserve Bank through the National Bank which shall give its comments on the merits of the application and sent it to the Reserve Bank: Provided that the co-operative bank shall also send an advance copy of the application directly to the Reserve Bank.

Approval from RBI

The shifting/relocation of these branches, if considered necessary by the bank, would be permitted subject to the following conditions:

• The proposal is for shifting/relocation of the converted branch within the city/town limit.
• Banking services to the existing customers of the extension counter, including the institutional customer, are ensured.
• No new extension counter will be allowed in the institution in which the extension counter is housed presently.