The Hindu Business Line : No merger of RRBs with parent bank: Chidambaram

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New Delhi Jan. 25 The Finance Minister, Mr P. Chidambaram, on Thursday made it clear that there was no proposal to merge any Regional Rural Bank (RRB) with the sponsoring parent bank and that they would continue to remain under the parent bank.

"All these ideas (to merge RRB with the parent bank) must not be encouraged. The parent bank would sponsor the RRBs. The RRBs would have to grow organically to fulfil the objectives for which they were set up," Mr Chidambaram told reporters after a meeting on RRBs here on Thursday.

He has also asked the RRBs to aggressively push credit to rural people not covered under the priority sector even while maintaining the pace of growth of the priority sector.

Meanwhile, the problem of `negative net worth,' estimated at about Rs 1,700 crore among 40 RRBs, figured in the meeting. "The negative net worth problem will receive Government's careful attention and we will take steps to get over this problem," Mr Chidambaram said.

Asked whether Government intends to recapitalise these 40 RRBs, he said that recapitalisation was one of the suggestions received at the meeting.

On consolidation, the Finance Minister said that there would be some more consolidation among RRBs and the final number would be 96 by end-June this year as against the current level of 102 banks.

He also said that the Government intends to pursue in calendar 2007 an intensive branch expansion programme for RRBs, which are operating with a network of 14,494 branches covering 525 districts in 26 States.

The Finance Minister also asked RRBs to more aggressively mobilise long-term deposits to ensure that there was no slowdown in credit growth to the farm sector and other rural areas.

Mr Chidambaram pointed out that RRBs would not be able to maintain their advances growth rate unless they aggressively mobilised deposits for the long term.

Advances of RRBs grew by 21.5 per cent and stood at Rs 39,712 crore as on March 31, 2006. Deposits outstanding on the other hand grew by 12.5 per cent and stood at Rs 71,328 crore as on March 31, 2006. Mr Vinod Rai, Secretary (Financial Sector), later told reporters that RRBs have been asked to come up with various alternatives for tackling the `negative net worth' problem.

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