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K.R. Srivats

New Delhi, July 15

Recapitalisation of Regional Rural banks (RRBs) with negative net worth is likely to come in for some elaborate discussion here on Monday, when the Union Finance Minister, Mr P. Chidambaram, meets the Chairmen of RRBs from all over the country.

Of the 96 RRBs, 29 RRBs comprising 11 amalgamated and 18 standalone RRBs have a negative net worth. The total fund requirement for recapitalisation of these 29 RRBs has been pegged at Rs 1,814.86 crore.

While the Centre (which has 50 per cent stake) would be expected to bring in Rs 907.44 crore, the sponsor banks would have to fork out Rs 635.20 crore and the remaining Rs 272.22 crore would have to come from State Governments. Mr Chidambaram, had in his 2007-08 Budget speech announced that RRBs with a negative networth be recapitalised in a phased programme.

On the phasing of recapitalisation, official sources said that the amalgamated RRBs may be taken up in the first phase so as to ensure their scheduling by the RBI. As regards the options for recapitalisation, sources said that the RBI is expected to ascertain from the sponsored banks the form the capitalisation could take. It could be cash infusion through recapitalisation bonds, cash neutral bonds or a combination of both, sources added.

Apart from the issue of recapitalisation of RRBs with negative networth, the Finance Minister is also expected to review the issue of branch expansion of RRBs in uncovered districts. The Finance Minister had in his 2007-08 Budget speech announced that RRBs should undertake an aggressive branch expansion programme.

Of the 622 districts as on June 1, 2007, 553 districts are covered and 69 districts uncovered. Of the 69 uncovered districts, 45 districts are in States having RRBs while 24 districts in the States not covered by RRBs.

More Stories on : Regional Rural Banks | Politics

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Chidambaram to meet RRB chairmen today

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