Securitisation Act will ensure better recoveries

BUDGET & MONEY

The measures are meant to widen the scope for RRBs, which as a group have performed better since 2000-01. The improvement in performance happened after the RBI had undertaken various reforms that allowed RRBs to lend to non-target groups, freed them from regulated deposit and lending rates, and also allowed them to invest surplus funds in profitable avenues.  The impact

The measures aimed at greater integration of the rural sector in general and agriculture in particular with the organised financial sector are expected to put RRBs on a significantly higher growth plane. The rise in advances for RRBs has been less than 20 per cent in the recent years, when the mainstream banking sector was seeing an explosive growth, particularly in retail lending. RRBs had a combined loan book worth Rs 39,713 crore at the end of March 2006. The proposed capital infusion in weak RRBs will be a big boost to those which are still loss-making and also to those with negative net worth.

 The proposal to bring them under the SARFAESI Act will enable RRBs to effectively deal with defaulters and ensure higher recoveries. Gross NPAs (non-performing assets) of RRBs were 7.30 per cent of the total advances and net NPAs 3.96 per cent on March 31, 2006.  The government