Nabard chief rules out NPA bubble in RRBs

In spite of slackening growth and upcoming elections, Nabard today said the regional rural banks (RRBs) will be able to maintain their gross non-performing assets this fiscal at the last year level of 6 per cent and will improve it to 5 per cent by the end of June.
"We think all the 57 RRBs as a whole will have gross NPAs of 6 per cent, the same as that on March 2013. We have also set them targets to improve it to 5 per cent in the next three-four months," Nabard Chairman H K Bhanwala told reporters here after a meeting on RRBs.

Nabard or the National Bank for Agriculture and Rural Development, supervises the conduct of RRBs.
The gross NPA ratio of RRBs rose to 6.08 per cent as of March 2013 as against 5.03 per cent in the year-ago period and 3.75 per cent in FY2010-11.
A senior Nabard official said all RRBs have been individually asked to formulate guidelines and get those approved by the boards in order to bring down the gross NPAs under the 5 per cent mark.
During the nine months ended December 2013, the number of RRBs having their gross NPAs above 5 per grew to 40 from the 38 in March 2013, according to data released by Nabard.

Asked if the elections -- which may lead to people not servicing the loans -- are a concern, Bhanwala said it is a non-issue as election is a regular affair in our country.

However, a senior Nabard official said during the meeting it has requested the government, which was represented by the financial services secretary Rajiv Takru, "to make a statement" to ensure that the elections do not cause any troubles in loan servicing.
The outstanding books of the 57 RRBs had stood at over Rs 1.37 trillion in March 2013, of which Rs 1.02 trillion were to the agriculture and allied sectors.

Bhanwala said the process of migrating to the core banking solution has been completed at all the RRBs and added for the next fiscal, they have been asked to focus on installing ATMs at those branches which witness over 100 transactions per day.
"The first phase of CBS is over. But the work should not stop there, we should now leverage on the benefits of it," he said, adding Nabard gave grants for implementing the CBS solution.
Barring one bank from Nagaland, Bhanwala said all the RRBs are now profitable, while 95 per cent have their capital adequacy ratios above the RBI-mandated 9 per cent mark.

He said at the meeting, Takru stressed on the need to let the market determine the price and conditions for the sale of RRBs' portfolios qualifying as priority sector lending, rather than the current practice of the sponsor bank taking over those assets.