The government on Sunday revised the pay scale and allowances of employees of regional rural banks (RRBs) and brought it on par with the nationalised banks.

The move will put an additional cost burden of Rs 791 crore on the exchequer in the form of arrears.

Announcing the wage revision on Sunday at the annual review meeting of RRB chairmen and general managers of sponsor banks, finance minister Pranab Mukherjee asked the RRBs to pull down their non-performing assets (NPAs) below 5% by this year itself.

He asked the RRBs to speed up their activities using new technologies like business correspondents, mobile banking vans and tele-banking.

Mukherjee also laid emphasis on expanding the core banking solutions platform of the RRBs.

The total loan outstanding of RRBs as on March 31, 2010, stood at Rs 83,562 crore whereas the deposits amounted to Rs 1,42,814 crore. The ground-level credit flow of RRBs grew 30% to Rs 56,268 crore from Rs 43,367 crore.

A significant part of their performance is substantial lending to the priority sector. RRBs are mandated to lend 60% of their loans to the priority sector.

During the last three years, RRBs have not only achieved the target fixed for the purpose but have maintained priority sector loans above 80%.

The government had initiated a series of measures in recent years to strengthen the RRBs. Apart from recapitalising 27 RRBs in 2007, the Centre had also made branch licencing norms flexible. RRBs have responded to these measures and have opened 716 branches during the last few years.

For further improving the financial health of RRBs, the Centre started the process of structural consolidation of RRBs by amalgamating RRBs sponsored by the same sponsor banks within the state.

The process is almost complete. Till date, there are 82 RRBs (46 amalgamated and 36 standalone) with a branch network of 15,475 branches covering 619 districts, 26 States and one Union Territory (Puducherry).

The meeting was also attended by financial services secretary R Gopalan, RBI deputy governor KC Chakravarty, Nabard chairman UC Sarangi and financial services additional secretary Rakesh Singh, among others.