RRBs to get Rs 1,580 cr recapitalisation from govt

Written by Mahua Venkatesh | New Delhi, Jan 28 | Updated: Jan 29 2008, 05:41am hrs
The government is likely to look at a proposal to provide Rs 1,580 crore to the regional rural banks (RRBs) before the close of the current fiscal as part of the recapitalisation programme. The state governments are to bear 15% of the total recapitalisation package, which is pegged at Rs 1,800 crore.

However, most states are yet to sign the memorandum of understanding (MoU) for restructuring. "The Centre may provide its share of the recapitalisation package during the current financial year itself," an official source said.

Arun Ramanathan, secretary, Union government's financial sector, will hold a meeting with CEOs of RRBs and representatives of sponsor banks on February 7. The issue of recapitalisation would come up for discussion, sources pointed out.

Representatives of the RRBs also met Prime Minister Manmohan Singh earlier to discuss various issues that plague the sector, including that of expansion of branch network.

Sources added that only eight states have signed the MoU with the Centre for restructuring of the regional rural banks. The delay on the part of state governments coming forward to sign is actually impacting the functioning of the RRBs, Dilip Mukherjee, general secretary, All India Regional Rural Banks' Employees Association, said.

At present, the RRBs have a total deposit base of about Rs 90,000 crore.

According to sources, within the RRBs, the finance ministry should encourage various state governments to use them to park their funds. The forthcoming budget may in fact spell out various steps, which would be taken to boost the deposit base of these banks.

In 2006-07, the RRBs have increased their net profit to about Rs 800 crore as against Rs 600 crore in the previous year. However, the accumulated loss has also seen an increase of about Rs 100 crore to Rs 1,700 crore in 2006-07.