RBI would keep on hold plans to liberalise the operation of foreign banks, including giving them more freedom to acquire private sector banks and extending national treatment to their wholly-owned subsidiaries. But RBI has allowed them and other banks to send out their employees to offer services up to 30 km instead of 15 km now. This has been one of the demands of foreign banks.
RBI will also allow banks to set up ATMs freely?without its approval. The RBI policy on foreign banks was issued in February 2005.
In a press statement, governor Subbarao, said, the policy ?will be taken up after due consultation with all stakeholders once there is greater clarity regarding the stability of the global financial system and a shared understanding on the regulatory and supervisory architecture around the world.?
?In view of the current global financial market turmoil, it has also been decided to continue, for the time being, with the current policy and procedures governing the presence of foreign banks in India?, the statement said.
On permitting banks to set up ATMs, Subbarao said, ?The policy to allow banks to set up ATMs without our permission is an extension of the policy to make ATM bank-neutral.? However, from April 1, banks are not allowed to charge the Rs 20 commission they used to levy on withdrawals by customers who are not their clients.
The measure to allow banks to send out their employees by relaxing the distance restriction to 30 kms will permit deeper penetration of banking services in rural areas. This will give foreign banks a larger footprint, without opening new branches.
Setting up a branch in cities like Delhi costs Rs 1 crore. RBI will constitute a working group to vet the experience of the business correspondent model and suggest measures to enlarge the category of persons that can act as such.
RBI will alsoset up a group to review the extant framework of the branch authorisation policy, with a view to providing greater flexibility, enhanced penetration and competitive efficiency consistent with financial stability.
The current branch authorisation policy requires banks to have a medium-term plan for branch expansion. The request for opening off-site ATMs was also required to be a part of such plans.