RRBs should sell priority-sector loans to highest bidders: Takru

Takru also asked the RRBs to control the rise in non-performing assets and bring them down in a time-bound manner

Regional rural banks (RRBs) should sell priority sector loans (PSL) to those making the highest bid, and not necessarily to their sponsor bank, to get better value for their portfolio, said Rajiv Takru, secretary, department of financial services, finance ministry.

Takru was addressing a meeting of RRB heads to review their performance at the headquarters of National Bank for Agriculture and Rural Development (Nabard) here on Tuesday.

There is always a risk of the sponsor bank putting pressure on RRBs to part with PSL book at a discounted price, said a senior Nabard official.

RRBs’ loan book consists of over 80 per cent of priority-sector loans such as credit to farmers, small and micro units, and the weaker section. These loans are sold through Inter Bank Participation Certificates (IBPCs). Those banks which fall short of PSL targets pick up these loans to meet the norms.

Takru also asked the RRBs to control the rise in non-performing assets (NPAs) and bring them down in a time-bound manner. “RRBs should increase revenue, reduce NPAs, and professionalise their services,” he said.

According to Nabard data, RRBs’ gross NPS have gone up from Rs 3,711.96 crore (3.05 per cent) in March 2011 to Rs 8,3,30.03 crore (6.08 per cent) at the end of March 2013.

During the course of discussions, some RRB executives expressed concerns over the clamour for waiver of farmers to pay outstanding loans during elections. One official who attended review meeting said RRBs wanted the government to send out a clear signal that there will not be any loan wavier scheme for farmers.

Nabard chairman Harsh Kumar Bhanwala said RRBs will install automatic teller machines in branches with over 100 transactions a day.

This will help boost use of alternate banking channels.