A recent press report said that the Reserve Bank of India has relaxed the branch opening norms in Tier II cities in order to improve and encourage the domestic scheduled banks to expand their branches in these areas. Hence the domestic banks need not require any prior approval to set up branches in Tier II cities.
The Reserve Bank of India said that the bank has proposed to permit the domestic scheduled commercial banks other than the regional rural banks to open up branches in the Tier II cities without the consent from the Apex bank in an intention to enhance banking services in Tier II cities.
The bank regulator found that the branch expansion in Tier II cities was not up to the mark as expected and hence the Central Bank has approved the banks to open up branches in Tier II cities without acquiring any prior permission from the RBI. In this regard, the banks can open up branches in Tier III to Tier IV cities and in the rural, semi urban and urban areas in the Northeastern states and Sikkim. But still the banks cannot open branches in Tier I cities without the consent of the Central Bank.
The RBI has recently hiked the key policy rates which have made it mandatory for banks to hike their lending rates. The hike in lending rates has made home loan and other retail loans dearer to the borrowers.