Banks will soon no longer need the RBI's permission to open branches, while foreign lenders will be encouraged to operate through wholly owned subsidiaries, Governor Raghuram Rajan said today as he unveiled his reform agenda for the banking sector. "The RBI will shortly issue the necessary circular to completely free bank branching for domestic scheduled commercial banks in every part of the country," Rajan said at his maiden press briefing soon after taking charge. "No longer will a well-run scheduled domestic commercial bank have to approach the RBI for permission to open a branch."
However, banks are required to fulfil certain inclusion criteria in underserved areas in proportion to their expansion in urban areas, he said. As per present regulations, domestic banks are required to compulsorily open 25 per cent of their branches in rural, unbanked areas. "We will restrain improperly managed banks from expanding until they convince supervisors of their stability...But branching will be free for all scheduled domestic commercial banks, except the poorly managed," he said.
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