MINISTER OF THE STATE IN THE MINISTRY OF FINANCE
(SHRI P. CHIDAMBARAM)
(a) and (b) Yes, Sir. 33 Regional Rural Banks (RRBs) had incurred a loss
of Rs. 183.64 crores during the year 2003-04. The details of loss making RRBs,
state-wise during the last three years are given in the enclosed statement.
(c) the main causes for the indifferent financial position of the RRBs
are limited area of operation, narrow client base, high cost of services, high
establishment cost and low margins and high proportion of Non Performing Assets
(NPAs).
(d) No such proposal is contemplated.
(e) Does not arise.
(f)and(g) Reserve Bank of India (RBI), National Bank for Agriculture and Rural
Development (NABARD) and Government of India have introduced several policy measures
for improving the operational and financial efficiency of the RRBs. The important
amongst them are as under:
1 Government has decided that each sponsor bank will
be held squarely accountable for the performance of RRBs under its control. RRBs
that adopt a new governance standard and that abide by the prudential . regulations
will qualify for receiving funds from the Government for restructuring.
2 With a view to stregthen and improve the viability of 5 RRBs, a process has
been initiated for structural consolidation of RRBs by amalgamation of
geographically contiguous RRBs sponsored by the same bank within a State.
3 In order to reduce NRAs as also to improve recovery, compromise settlement
of dues through Lok Adalats has been introduced.
4 In order to build up the skills and expertise of the personnel of RRBs, NABARD
continued to give special priority to RRBs to train their staff through training
institutions like Bankers Institute for Rural Development (BIRD), Lucknow, Regional
Training Centres at Mangalore and Bolpur. RRBs officials are being trained in
specialized areas like Project Management under Farm and Non-farm sectors,
Asset-liability management, Fund Management, apart from training in the areas of
Internal Control, MIS, Personnel Managment and Industrial Relations.
5 Revised instructions were issued for maintenance of SLR by RRBs requiring them
to maintain their SLR only in government and other approved securities.
6 In respect of loss incurring RRBs, Sponsor Banks have been advised to evolve
Bank Specific Strategic Plan for attainment of viability in a fixed time frame.
7 The RBI has constituted an Empowered Committee in its Regional offices with
members drawn from NABARD, sponsor banks, convenors of SLBCs and State Governments
to ensrue that RRBs adhere to good governance . and comply with prudential regulations.
The Committee would also focus on operational issues and provide clarification on
regulatory issues.
