The Reserve Bank of India (RBI) on Thursday allowed banks to shift, merge or close branches in urban areas without seeking its prior permission.

In a notification on its website, RBI said banks can “shift, merge or close all branches except rural branches and sole semi-urban branches at their discretion”.

Shifting, merging or closing a branch in a rural area or a sole branch in a semi-urban area would, however, continue to require prior permission from RBI, the notification said.

Banks are also no longer required to report details of opening new mobile branches, automated teller machines (ATMs) or call centres.

Closure, merger, shifting or conversion of any of the above places of business need no longer be reported by banks except to the Department of Banking Statistics of RBI.

This is the second major reform in how RBI regulates branches in India after 2013, when it permitted banks to open branches in tier 1 to tier 6 cities without seeking its prior permission.

RBI said the latest notification allows banks “greater operational freedom.”

The notification also allowed banks to shift some activities from a branch due to space or rental constraints without seeking RBI’s permission.

“However, it may be noted that banking activity, that is, deposit or loan business, cannot be maintained at both places, and the new location for part-shifting would have to be within 1 km of the existing location. They (banks) may also spin off certain activities such as government business into separate branches at their discretion,” RBI said.

Banks would have to ensure that customers of the branch which is being shifted, merged or closed are informed well in time so as to avoid inconvenience to them. “Further, while considering shifting/merger/closure of branches, banks should ensure that they continue to fulfil the role entrusted to these branches under government-sponsored programmes and direct benefit transfer schemes,” RBI said.

Banks have to also ensure that the needs of their customers in rural and semi-urban areas are met through mobile vans or business correspondents if the bank decides to shut the branch in those areas. (LiveMint)