Rural banks free to increase branches, BSP says

Rural banks, which provide financial services in the countryside, are now allowed to put up more branches in Metro Manila.

The Bangko Sentral ng Pilipinas said in a circular that rural banks may now put up more than one branch in Metro Manila, as long as they engage in microfinance and meet the required capitalization.

The circular said that a rural bank must have a capital base of P100 million to be allowed to put up additional branches in Metro Manila.

The move to relax branch restrictions is expected to help spur lending to micro enterprises, which are believed to significantly aid in poverty-reduction efforts if given sufficient government support.

While micro loans have been made accessible to some provinces, these financial services are not as widely available in Metro Manila.

The country’s capital is home to universal and commercial banks, but these do not really cater to micro enterprises.

The move of the BSP to relax rules on branching by rural banks is part of its thrust to liberalize branching for all banks.

Earlier this month, the BSP issued a circular allowing universal and commercial banks to put up more branches in key cities in Metro Manila.

These key cities include Makati, Mandaluyong, Manila, Parañaque, Pasig, Pasay and San Juan.

Bank branching was previously restricted in these cities since regulators deemed that there were already too many banks in those areas.

The BSP eventually lifted the restrictions, saying that the growing economy has led to an increase in demand for banking services.

“We [BSP] are expecting that liberalization of bank branching will further improve the competitive environment, and this should translate to better financial services to the public,” BSP Governor Amando Tetangco Jr. said earlier.