West Bengal agrees to release its share of RRB recap fund

KOLKATA: West Bengal has agreed to release its share of regional rural banks recapitalisation funds, despite acute fund shortages as it pays Rs 2,000 crore every month to service its Rs 2.3 lakh crore outstanding debt.

The state's contribution comes to Rs 83.25 crore for its 15% share in each of three RRBs operating here. ""It is not a small amount (for a debt-stressed state) but the government has decided to release it,"" state finance minister Amit Mitra told bankers at a meeting on Wednesday.

He however did not mention when the fund will actually be paid. Once it does, the centre and sponsor banks to release their share too.

The centre has proposed a total capital infusion of Rs 555 crore in three RRBs in the state as part of its national agenda to strengthen weak rural banks having capital adequacy ratio less than 9% and equip them to expand banking penetration in unbanked villages.

The Union finance ministry had announced the plan in February 2011 but the process of recapitalisation has been slow as many states showed indifference in releasing their share.

The largest RRB in Bengal -- Bangiya Gramin Vikas Bank (sponsored by United Bank of India) is slated to receive Rs 265 crore from three stakeholders, while Paschimbanga Gramin Bank (sponsored by Uco Bank) is likely to get Rs 258 crore and Uttarbanga Kshetriya Gramin Bank (sponsored by Central Bank of India) Rs 32 crore.

The Centre, sponsor banks and the state government hold equities in RRBs in 50:35:15 ratio and they will share the burden accordingly.