Govt plans RRB revival in phased manner

KOLKATA: The Union government may need to release nearly Rs 2,000 crore to revive 30 regional rural banks (RRBs), which are struggling with negative net worth. Their collective negative net worth is nearly Rs 1,800 crore. There are 96 regional rural banks in the country, following the RRB amalgamation exercise.

The ministry of finance will meet select RRB chairmen on Monday to discuss issues relating to recapitalisation support as well as their business development. The ministry has decided to offer capital support to weak RRBs to strengthen the overall rural bank set-up. The size of the recapitalisation funds is yet to be finalised.

However, observers feel that the ministry needs to shell out at least Rs 1,800 crore to wipe out the negative net worth and another Rs 60 crore towards fresh capital infusion. The government may release the capital in a phased manner.

Some quarters indicated that the ministry may also consider wiping off RRBs’ cumulative accumulated losses to strengthen their operations. They have collective accumulated losses of Rs 2,600 crore, according to banking sources.

Uttar Bihar Khetriya Grameen Bank has run up the highest accumulated loss of Rs 395 crore, followed by Kalinga Gramya Bank (Rs 237 crore) and Bangiya Grameen Vikas Bank (Rs 221 crore).

“RRBs are poised to play an important role in financial inclusion drive, especially in the interiors. Providing capital support will help weak entities take part in this inclusive banking drive,” said the All India Regional Rural Banks’ Employees Association general secretary D K Mukherjee.

The association has requested the finance minister to consider shelling out the capital in cash and not in bonds. “We have requested the minister to ensure financial, structural and manpower backup so that we can face the new challenge,” Mr Mukherjee said.

RRBs have a network of around 14,500 branches. They are present in around 530 districts, out of the total 600 districts in the country. Out of the 96 RRBss, 80 are making profits. The collective profit is expected to be around Rs 700 crore. The 16 loss-making banks have reported a collective loss of Rs 290 crore.