The Hindu Business Line : RRBs recapitalisation by March 2010: Chidambaram

New Delhi, July 16 The Finance Minister, Mr P. Chidambaram, said on Monday that all the 29 Regional Rural Banks (RRBs) with negative networth would be recapitalised by March 2010. This is however subject to the nod of the States’ which have a 15 per cent stake in each of the RRBs.

“We intend to write to the State Governments and ask them to contribute their share in the recapitalisation. Where State Governments agree to bring in their 15 per cent contribution, those RRBs would be recapitalised immediately,” Mr Chidambaram told reporters after his nearly four-hour long meeting with the Chairmen of RRBs here on Monday.

Of the 96 RRBs, 29 have a negative networth. The total fund requirement for recapitalisation has been estimated at about Rs 1,850 crore.

The Finance Minister indicated that RRB recapitalisation would not move forward if the States do not come up with their contribution towards their 15 per cent stake. “I do not want the States to dilute their stake in RRBs,” he said, when asked whether the Centre would go ahead and recapitalise RRBs even if the States do not give their nod for such an exercise.

On the mode of recapitalisation, Mr Chidambaram said that both the options of cash infusion and recapitalisation bonds are open for the Centre. The sponsoring banks would be expected to bring in cash towards their 35 per cent stake.

The Government’s first-ever meeting with the Chairmen of RRBs saw review of branch expansion of RRBs in uncovered districts.

Mr Chidambaram said that it was decided at the meeting that all the uncovered districts would be covered by the end of the current fiscal.

Cutting down NPAs

It was also decided that net non performing assets (NPAs) of RRBs would be brought down from 3.4 per cent to 1.3 per cent or less by March 2010.

Of the 96 RRBs, 56 are making profits, 24 have accumulated losses but making current profits and 16 have accumulated losses as well as current losses. “The 16 RRBs (that have accumulated losses as well as current losses) will become currently viable RRBs by March 2010,” Mr Chidambaram said.

HR, co-branding

The Finance Minister said that the meeting also discussed human resource issues, offering of new products through RRBs such as insurance, co-branding of products and services with the sponsor bank and training of officers and staff of RRBs.

It was also decided that each branch of an RRB should have a farmer club by March 2008.

Moreover, each branch would during this fiscal be required to issue 150 kisan credit cards as against the earlier specified requirement of 100 kisan credit cards.

Mr Chidambaram also saw scope for further consolidation among RRBs.

“There is still scope for converting 24 (of the total 96) RRBs to 10 RRBs. The principle is one sponsor-one state-one RRB,” he added.