SBI, Central Bank are major sponsors in RRB revival plan
The banks would need to make a collective contribution of Rs 635 crore towards the recapitalisation plan. The Centre has finalised a Rs 1,814-crore recap package for 29 RRBs.
By Atmadip Ray, TNN |
KOLKATA: The nitty-gritty of the recapitalisation plan for regional rural banks (RRBs) is being worked out. Central Bank of India and State Bank of India (SBI) will shoulder the maximum burden for providing the capital support to regional rural banks (RRBs) with negative net worths.
The SBI and Central Bank are among a dozen banks that need to participate in the proposed RRB recapitalisation plan, as directed by the Union government. The 12 banks would need to make a collective contribution of Rs 635 crore towards the recapitalisation plan. The Centre has finalised a Rs 1,814-crore recap package for 29 RRBs.
These banks have eroded their capital and need financial assistance to carry out fresh business. The Centre itself will inject Rs 907.44 crore while the state governments will collectively contribute Rs 272.22 crore towards this revival scheme. The central government owns 50% in a single RRB, while sponsor banks hold 35% and the state government, 15%.
However, banks would not necessarily need to dole out cash directly in the weak RRBs under their fold. The Centre has allowed sponsor banks to decide the form of capitalisation. Banks may either infuse cash into RRBs by issuing recapitalisation bonds or issue cash neutral bonds, or they may opt for a combo-plan.
The Reserve Bank of India (RBI) indicated that fresh capital should be infused into RRBs with negative networths in such a way that after this exercise, all 29 RRBs have a minimum net worth of Rs 1 crore. This would provide comfort to their depositors and lenders.
According to data available with ET, Central Bank will need to infuse Rs 149 crore into its three rural banks. SBI has eight rural banks with negative net worth in its ambit, and will inject nearly Rs 140 crore into these entities. Besides, United Bank of India (UBI) needs to provide Rs 129 crore for its three weakest RRBs while Uco Bank requires Rs 115 crore for its four RRBs with negative net worths.
These four banks will shoulder nearly 85% of banks’ share in the RRB revival plan. One agriculture co-operative bank — the Uttar Pradesh State Co-operative Bank (UPSCB) — would take part in this programme. It needs to dole out Rs 8.9 crore towards this end. Two private banks — Jammu & Kashmir Bank and Bank of Rajasthan are also part of the scheme (see chart for details).
The government may implement this recapitalisation scheme in two phases. Newly-formed RRBs after the amalgamated exercise may get capital support in the first phase. This would help these banks meet the scheduling requirement under Section 42(6) of the RBI Act, 1934.
The SBI and Central Bank are among a dozen banks that need to participate in the proposed RRB recapitalisation plan, as directed by the Union government. The 12 banks would need to make a collective contribution of Rs 635 crore towards the recapitalisation plan. The Centre has finalised a Rs 1,814-crore recap package for 29 RRBs.
These banks have eroded their capital and need financial assistance to carry out fresh business. The Centre itself will inject Rs 907.44 crore while the state governments will collectively contribute Rs 272.22 crore towards this revival scheme. The central government owns 50% in a single RRB, while sponsor banks hold 35% and the state government, 15%.
However, banks would not necessarily need to dole out cash directly in the weak RRBs under their fold. The Centre has allowed sponsor banks to decide the form of capitalisation. Banks may either infuse cash into RRBs by issuing recapitalisation bonds or issue cash neutral bonds, or they may opt for a combo-plan.
The Reserve Bank of India (RBI) indicated that fresh capital should be infused into RRBs with negative networths in such a way that after this exercise, all 29 RRBs have a minimum net worth of Rs 1 crore. This would provide comfort to their depositors and lenders.
According to data available with ET, Central Bank will need to infuse Rs 149 crore into its three rural banks. SBI has eight rural banks with negative net worth in its ambit, and will inject nearly Rs 140 crore into these entities. Besides, United Bank of India (UBI) needs to provide Rs 129 crore for its three weakest RRBs while Uco Bank requires Rs 115 crore for its four RRBs with negative net worths.
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These four banks will shoulder nearly 85% of banks’ share in the RRB revival plan. One agriculture co-operative bank — the Uttar Pradesh State Co-operative Bank (UPSCB) — would take part in this programme. It needs to dole out Rs 8.9 crore towards this end. Two private banks — Jammu & Kashmir Bank and Bank of Rajasthan are also part of the scheme (see chart for details).
The government may implement this recapitalisation scheme in two phases. Newly-formed RRBs after the amalgamated exercise may get capital support in the first phase. This would help these banks meet the scheduling requirement under Section 42(6) of the RBI Act, 1934.
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