RBI drawing up approach paper on RRBs

The Reserve Bank of India (RBI) will assist the Finance Ministry in preparing the roadmap for restructuring regional rural banks (RRBs). The Central Bank, on a request from Finance Minister P. Chidambaram, is preparing an ‘approach paper’ on the issues relating to viability of RRBs.

RBI’s role here assumes importance in the light of the Budget announcement wherein a larger role by sponsor banks for the development of RRBs has been mooted. RBI’s ‘approach paper’ will deal with the issues of recapitalisation, credit disbursal, appointment of chairman and general manager in RRBs, constitution of board of RRBs among others.

In the restructuring process, the Ministry will also take into account all the committee reports on RRBs. Three committees have been set up since 2001, to look into the RRB structure.

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Sources said that the Ministry is expected to proceed for restructuring the RRBs and amending the RRB Act, 1976, after discussing the RBI suggestions.

It also sent a reference note to RBI and outlined that fresh capital support would be considered for the weaker RRBs, which have shown progress in areas of non-performing assets (NPA) recovery, improvement in credit deposit ratio, and reduction of current or accumulated loss.