KARACHI, Dec 4: The State Bank on Wednesday issued the updated version of its policy regarding issuance of licences to local and foreign banks to open branches.

The new policy circulated through a circular to all the banks says that each bank will submit to the SBP its annual branch expansion plan for opening branches at least 30 days before the start of the new calender year. The plan should indicate the number of the new branches that the bank proposes to open.

The plan should also indicate the number of the branches that the bank concerned proposes to close down.

The circular says that the SBP would issue licence for opening branches when evidence is provided that adequate security arrangement has been made and town planning regulations have not been violated. But the licence would be issued on submission of a formal application for opening up a particular branch and not merely upon the submission of the bank’s annual branch expansion plan.

The approval in principle granted under the annual expansion plan shall lapse in case the bank fails to submit a formal application for issuance of licence at least 30 days before the expiry of that particular year. Similarly, the licence issued under respective annual branch expansion plan shall expire where a bank fails to open the branch before December 31 of that year.

The circular says that every banking company shall submit to the SBP within seven days after the close of each reporting year a quarterly statement regarding installation of automated teller machines (ATMs). “The eligibility of a bank to open a new place of business shall be considered by the SBP keeping in view the financial strength of the bank as evident from its net worth; adequacy of its capital structure; record of earning capability; future earning prospects of the bank; managerial capability; liquidity position; track record of the bank’s adherence to prudential regulations; credit disciplines; quality of customer services; staff-management relationship and the needs of the population of the area to be served by the proposed bank branch.”

The circular says that the opening of branches in rural and under banked areas will be given preference. It says that preference will also be given to those branches which will be connected electronically, provide utility bill receipt services and expedite delivery of home remittances. In case of foreign banks the guiding factors for the grant of fresh licences would be the preference of their existing branches, level of commitment to the local market, sound international reputation, provision of full range of banking services and investment by their head offices, etc.

Banks will be free to close any of their existing branches at banked places, without obtaining prior approval of the SBP. Banks will also be free to close any of their branches in non-banked areas provided the area is not left without an alternate arrangement for provision of banking services to the local community. The term un-banked area applies to places where there is no bank branch within a radius of five kilometre.

The circular says that stated-run and denationalized banks — Habib Bank, National Bank, United Bank Ltd, Muslim Commercial Bank and Allied Bank — will be allowed to consolidate their existing branch network outside the framework of the branch licensing policy. The circular further says that these banks will not be allowed to open additional branches during 2002, but they will be allowed to relocate any of their existing branch anywhere in the country.

The circular says that licences will be freely granted to banks for opening of permanent as well as temporary booths for receiving utility bills and government dues/revenue or cash and for exchange of foreign currency. National Bank will be allowed to open booths for receiving railway cash and other government dues on the recommendations of the department concerned.

The circular further says that licences will also be freely granted for opening of temporary booths for providing banking facilities to the public, on occasion of an exhibition or conference, etc., for making on the spot payment to growers of agricultural commodities during the crop season. Licences will also be issued for opening of temporary booths for providing limited banking facility to the participants of international conferences and members of national/provincial assemblies and Senate when in session and for Hajj.

The circular says that banks will be free to close any of their existing booths operating at banked places except for utility bills collection booths, without obtaining prior approval of the SBP. Similarly, banks can shift their permanent booths (other than utility bills collection booths) within the same city or town or village without prior approval of the SBP.