Model Branch Authorization Policy for Urban Co-

operative Banks – General Permission

1. Introduction: Reserve Bank of India (RBI) had, on February 15, 2021 had
constituted an Expert Committee on Primary (Urban) Co-operative Banks
under the chairmanship of Shri N. S. Vishwanathan, former Deputy Governor,
Reserve Bank of India. The Expert Committee was required to examine the
issues and to provide a road map for strengthening the sector, leveraging on
the recent amendments to the Banking Regulation Act, 1949 (As Applicable to
Co-operative Societies). The Committee submitted its report in August 2021. In
its report the Committee observed that the legislative framework has provided
adequate headroom to the RBI to allow UCBs to grow organically. For the
commercial banks, the permission to open branches is automatic and it is
withdrawn in specific cases as a regulatory response to deal with entity specific
concerns. The approach with regard to UCBs has been the contrary. To enable
the UCBs to grow and harness their potential, similar approach as with
commercial banks may be adopted with suitable modifications having regard to
the differential regulation for different tiers of banks. Based on the
recommendations of the expert committee, in order to rationalise the process
of branch opening and to enable the UCBs to tap growth opportunities in the
sector, the Reserve Bank of India came out with a policy of general permission
for branch expansion in the approved area of operation to financially strong
UCBs.
2. Scope: The Financially Sound Well Managed (FSWM) UCBs are permitted to
open new branches up to 10 per cent of the number of full-fledged branches (at
the end of previous financial year) in a financial year, subject to a maximum of
five branches without having the need to take permission from Reserve Bank
of India. However, if the total number of full-fledged branches (at the end of
previous financial year) is less than 10, the bank will be eligible to open at least
one branch. The UCB may either open a new branch or upgrade an Extension
Counter, which has been in operation for more than three years, to a full-fledged
branch, within the overall limit of 10 percent.
3. Eligibility of the Bank: As on March 31,2023 we have ---branch/s and hence
we are eligible to open one branch in the financial year 2024-25. The Bank is a

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 FSWM UCB as per the audited balance Sheet as on March 31,2023 and also
as assessed by the Reserve Bank of India in its inspection report based on
financial position as on March 31,202...
4. Definition of Financially Sound Well Managed (FSWM) UCB:
The criteria for determining the FSWM status have been given as under:
a. The CRAR shall be at least 1 percentage point above the minimum CRAR
applicable to an UCB as on the reference date;
b. Net NPA of not more than 3%;
c. Net profit for at least three out of the preceding four years subject to it not
having incurred a net loss in the immediately preceding year;
d. No default in the maintenance of CRR / SLR during the preceding financial
year;
e. Sound internal control system with at least two professional directors on the
Board;
f. Core Banking Solution (CBS) fully implemented; and
g. No monetary penalty should have been imposed on the bank on account of
violation of RBI directives / guidelines during the last two financial years.
The process of deciding the eligibility for being classified as a FSWM UCB may be
carried out as per the above criteria based on the assessed financials and findings of
RBI inspection report or audited financial statements, whichever is latest. The
compliance to the FWSM criteria shall be examined by the Board and pass necessary
resolution approving the same and inform the Regional Office of Department of
Supervision, Reserve Bank of India, Bengaluru immediately, and in any case, not later
than within 15 calendar days from the date of passing the resolution. The compliance
with FSWM criteria shall be reviewed every year at Board level as indicated above
immediately after the audit of the financial statements and RBI inspection report as
and when received. Before initiating action for opening a new branch, it should be
ensured that the bank fulfils the criteria set out for becoming a FSWM UCB.
5. Determination of Financial Viability of a new branch:
A detailed viability report for opening a new branch may be prepared. The
report, inter alia, may contain the following:
i) Area of operation of the bank
ii) Number of existing branches. In the case of branches making losses, give
details as in Table 'A'.
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 iii) Location of proposed branch
iv) Reasons for the proposed branch
Detailed reasons for the proposed branch may be stated giving statistical and other
data, as under, which may have been collected for the proposed branch :
a) The population of the area of operation of the proposed branch
b) What are the types of clients whom the bank expects to cater?
c) The volume and value of agricultural, mineral and industrial production, and
imports and exports of the area of operation of the proposed branch as under:

Commodity Production Imports Exports

Volume Value Volume Value Volume Value
1 2 3 4 5 6 7
(iv)
(v)
(vi)
(vii)
I. Deposit Amount in thousands of Rates proposed to be allowed
rupees on various types of deposits.
II. Advances Amount in thousands of Rates proposed to be charged
rupees on various types of advances.
(viii) Given details regarding Government subsidiary, if any, for
meeting the managerial cost of the proposed office of for
branches running at a loss.
d) System of supervision and control over the proposed branch : Give a brief
description of the system of supervision and control which will be exercised
over the proposed branch and the authority of the officials at the proposed
branch regarding advances (including bills purchased and discounted).
e) Expenditure: State the amount, if any, already spent or proposed to be spent
on staff, premises, furniture, stationery, advertising, etc., in connection with the
proposed branch. Also state the minimum income which the Bank expects to
earn at the proposed branch in 12 months.
f) Other particulars: Any additional facts, if any, in support of the opening of the
proposed branch.
5. Authority: The Board is authorised to take a decision on opening new branch
/es within the approved area of operation under the scheme of general
permission accorded by RBI, without seeking prior approval from RBI. Based

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 on the viability report, if the proposed branch is viable and the bank has been
declared as FSWM UCB, a Board Resolution has to be passed to approve the
opening of the proposed branch.
6. General: A report may be submitted to the Reserve Bank of India, Bengaluru
within 15 calendar days, after opening of the branch complying with all the rules,
as per the RBI prescribed format.

TABLE 'A'

Number of Existing branches making Losses .................

Name Description, Date of Amount of DEPOSITS ADVANCES Remarks

of i.e., whether opening loss during the As on the date of the
place branch, sub- preceding year last balance-sheet
office, pay-
office, sub-
pay-office, etc.

TABLE 'B'
Particulars regarding branches which have been in existence for
less than three years on ….
As on the latest date with reference to which the particulars are available.
(Rounded off to the nearest thousand)
Name Description, Date of DEPOSITS ADVANCES Re-
of i.e., opening Current Savings Fixed Others Total Total Of marks
Of
place whether which which
branch, over- bad or
sub- due doubt-
office, pay- ful
office, sub-
pay-
office, etc.
1 2 3 4 5 6 7 8 9 10 11 12

N.B: If, at any of the branches shown in Table B, has failed to realise, within one year, the expected
business as envisaged at the time of opening the branch , the reason therefor should be given in the
remarks column of the Table.

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Compiled by Sudhakara Bhat, Banking Advisor