"Further, increased availability of bank branches and other outlets would enable people in the regions to avail themselves of financial services at a lower transaction cost."
The new branch rule comes as the central bank has tightened monetary policy to limit credit growth with inflation above 25 percent. Savings deposits now pay less than 10 percent.
Large private banks reported flat loan growth in the first quarter. This was to increase the access to credit to areas outside the Western province, where banking density was lower.
"This new policy will be applicable for all future requests made to the Central Bank for opening of branches by licensed banks and registered finance companies," the financial regulator said in a statement.
In Sri Lanka banks have to get approval from the central bank to open new branches.
The Central Bank says it now approves the new branches and other outlets by licensed banks and registered finance companies by considering the feasibility and su