7 RRBs likely to get Rs 380 crore

As a part of Rs 1,800 crore recapitalisation scheme, seven regional rural banks (RRBs) across the country are likely to get Rs 380 crore as share capital deposit by the end of this year.

The accumulated losses of RRBs was estimated at Rs 2,700 crore.

The government so far had infused Rs 1,400 crore to about 20 RRBs, according to banking sector sources.

This apart, the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (Nabard) were working out capital-to-risk-assets ratio (CRAR) norms for the RRBs, which could be implemented soon, said a top official at Nabard.

At present, there is no CRAR prescription for RRBs.

Also, the Institute of Chartered Accountants of India (ICAI) is working on new accounting norms for the RRBs in consultation with Nabard, so as to streamline accounting procedure at a lesser cost.

"ICAI is working with Nabard to make RRBs financially viable, by looking into factors like capitalisation, operating loss and sustainability. There is a procedure for accounting standards laid down for RRBs, but most of them are not able to comply with them at present," said sources at ICAI, which will submit its recommendations to the RBI soon.

According to a RBI report, during the year 2003-04, 163 RRBs earned profits amounting to Rs 953 crore while 33 RRBs incurred losses to the tune of Rs 184 crore.

Ninety RRBs had accumulated losses as on March 31, 2004.

Aggregate accumulated losses of RRBs amounted to Rs 2,725 crore during the year 2003-04.

Of the 90 RRBs having accumulated losses, 53 RRBs had eroded their entire owned funds and also a part of their deposits (to the extent of Rs 1,660 crore or 11.75 per cent of the total deposits of these banks).

"The RRBs could be advised to maintain a desirable level of capital adequacy. However, it is felt that while RRBs are required to maintain CRAR, the ratio may not be as high as that of commercial banks and may be initially kept at five per cent as about 100 RRBs are falling short of five per cent CRAR," according to the RBI report. There are 86 RRBs in the country. Sources in the banking industry said, the highest CRAR for a RRB was 33 per cent, while the lowest was -109 per cent, said sources in Nabard.