FM exhort RRBS to become market leaders in financial inclusion
Finance Minister Shri Pranab Mukherjee hold a meeting to review the performance of Regional Rural Banks here today. The meeting was attended by Minister of State Shri Namo Narain Meena, Finance Secretary Shri Ashok Chawla and other senior officials of the Ministry, RBI, NABARD and Chairmen of Regional Rural Banks. In his inaugural address, the Finance Minister said that Rural Banks are a vital and integral segment of the Indian banking system. Their focus on providing efficient financial services in the rural areas for the purpose of development of agriculture, trade, commerce and industry and other productive activities in the target areas has resulted in credit reaching a large populace in the rural areas. Nearly 70% of the credit disbursed by the RRBs has gone to the agriculture sector. RRBs have taken active part in the implementation of the ADWDR Scheme and given waiver as well as relief amounting to Rs.6,866.33 crore in the case of 38.09 lakh accounts. They have also disbursed a total credit of Rs.38,582 crore and Rs.41,220 crore during the years 2007-08 and 2008-09 respectively, he said.
Shri Mukherjee said that considering the tremendous potential of RRBs with their presence in the rural areas of the country, Government of India initiated the process of restructuring of RRBs in September, 2005 and as a result thereof, 159 RRBs have been amalgamated. As on date, there are 84 RRBs (46 amalgamated and 38 stand alone). The new amalgamated RRBs are being included in the Second Schedule to the RBI Act, 1934 by RBI after following the due process which includes statutory inspections by NABARD.
Speaking on the occasion he said that GoI also initiated a series of measures to help the RRBs to improve their financial performance and enhance their capability to undertake diverse banking activities in a competitive environment. As a part of this initiative it was assessed that 27 RRBs having negative net worth in the financial year 2006-07 would require a total recapitalization assistance of Rs. 1,796 crore to wipe out their accumulated losses and to make their net worth positive. Since the share capital of RRBs is contributed by Government of India, Sponsor Banks and State Governments in the ratio of 50:35:15 respectively, action was initiated in consultation with the State Governments concerned to recapitalize the RRBs having negative net worth in March 2007. He noted that as on date all these RRBs have been fully recapitalized. He expressed confidence that the RRBs and NABARD will work together towards ensuring that they do not slip back into losses and that the weak RRBs try to attain current and sustainable viability at the earliest.
FM said that to extend the facilities of institutional finance to the rural hinterland, the need for expansion of the branch network of the RRBs has been highlighted in this Budget. He exhorted the participating Chairmen of RRBs to go forward and expand their branch networks in order to increase your outreach to ensure that no habitation suffers from lack of access to banking facilities. RBI has already made the branch licensing norms more flexible and as a result, during the last 2 years the RRBs had opened 715 new branches, he added. He suggested that targets should be set by each RRB to give greater thrust to branch expansion and at least 2000 more branches are opened in the coming two years i.e. 2009-10 and 2010-11.
FM appreciated the good work done by RRBs, he, however, exhorted them to play a greater role in augmenting the flow of credit to the rural areas and reaching the unreached sections. He noted that the RRBs have been making efforts in establishing Farmers' Clubs, issuing Kisan Credit Cards, General Credit Cards and opening of 'No-frills accounts' in efforts towards financial inclusion and NABARD has taken up a R&D Project on financial inclusion with ICT solutions in 15 RRBs of the country. He expressed the hope that with support from RBI and NABARD, the RRBs shall emerge as the market leaders in the Ministry’s plan for achieving cent percent financial inclusion.
Shri Mukherjee said that in the competitive banking environment, technology up gradation of the RRBs is of vital importance. The level of computerization in the RRBs varies widely. Only 9 RRBs are fully computerized, while many branches do not have any computers at all, he noted. He recalled that in the meeting held on August 27, 2008, it was decided that the Sponsor Banks would take the initiative and guide their RRBs to implement the Core Banking Solution at the earliest possible. He applauded the Sponsor Banks, especially, SBI, PNB and Union Bank for taking up this task seriously and helping their RRBs move over to the CBS system. He encouraged the remaining Sponsor Banks to come forward so that the public sector banking in India as a whole begins working on the CBS platform. FM requested the sponsor banks to ensure that the technology solutions provided to the RRBs are safe, modern, scalable and such that fully meet their future requirements also.
FM expressed hope that the interaction held today shall be fruitful and will help to come out with pragmatic suggestions for further improving the efficiency, financial strength and sustainability of the RRBs.
