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A short-term credit-refinancing fund and extension of capitalisation for two more years have been proposed for regional rural banks (RRBs).
The Finance Minister, Mr Pranab Mukherjee, said that the process of capitalisation of 40 financially weak RRBs has been initiated. By February, the process had been completed for 12 banks.
SCHEME EXTENDED
The Government proposes to extend the scheme of capitalisation of weak RRBs by another two years to enable all States to contribute their share. Mr Mukherjee also said that a short-term RRB Credit Refinance Fund is being set up to enhance the capacity of these banks to disburse short-term crop loans to small and marginal farmers. The Budget allocated Rs 10,000 crore to National Bank for Agriculture and Rural Development (Nabard) for refinancing RRBs through this fund. Of the 82 RRBs in the country, 81 are already under the core-banking network. The move to bring them under core-banking system (CBS) is based on the report of the working group on technology upgrade of RRBs set up by the Reserve Bank of India in 2008.
CBS TECHNOLOGY
The working group had suggested that all RRBs begin moving towards CBS and achieve 100 per cent coverage by September 2011. However, of the 82 RRBs in the country, 65 had implemented CBS by September 30 last year. They have also joined the National Electronic Fund Transfer system, he added.
To take forward the process of financial-sector legislative reforms, the Government proposes to move two Bills in the Budget Session of Parliament: the National Bank for Agriculture and Rural Development (Amendment) Bill, 2012 and the Regional Rural Banks (Amendment) Bill, 2012.
FLEXIBILITY for nabard
The Act would allow Nabard the flexibility to do business like any nationalised bank except for getting into retail banking, corporate lending or market operations.
It will be free to develop new credit products, credit linkages and new clients.
Meanwhile, the central bank had observed that if corporates were keen on improving financial inclusion, they could take over some of the weaker RRBs and strengthen them through capital and technology infusion. But the relevant Act of 1976 vintage needs amendment to that effect.
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