The finance ministry is not in favour of corporates acquiring dedicated rural lenders, regional rural banks, a suggestion mooted by the Reserve Bank of India in a recent discussion paper on new bank licences.
“The disinvestment mandate is clear that we’ll not bring down the government stake in banks below 51%,” said a finance ministry official ruling out the proposal.
Under the current set up, the central government holds 50%, state government 15% and sponsoring banks 35% stake in a regional rural bank, which are tasked with providing credit in rural areas.
As an intermediate step, industrial and business houses could be allowed to take over RRBs, before considering allowing them to set up banks, the central bank had suggested in the discussion paper “Entry of new banks in private sector” .
The RBI had argued that this will give industrial and business houses an opportunity to prove their suitability for promoting banks and promote financial inclusion in underbanked areas.
The idea has not found favour with the public sector banks, one of the promoters of these banks. “It is foolish to think that we’ll give up our stake in these RRBs and offer it to some private company on a platter,” said executive director with a Mumbai-based public sector bank.
“All of our RRBs are stable and also we can synergise with them in our efforts towards financial inclusion,” said a senior official with Punjab National Bank , adding that bank’s are making effort to put them on a par with sponsoring banks in terms of technology.
NABARD, the specialised refinance agency for rural lending, is also working with RRBs to deepen the reach of modern banking through a an information and communication technology platform in 30 districts of 14 states.
There are 82 regional rural banks with a network of 15,475 branches. They provided a combined credit of . 56,268 crore in 2009-10 , up nearly 30% from . 43,367 crore in the year before. The government has set a up a 100 crore fund for providing technological support to the regional banks.
As of now 30 regional rural banks had accumulated losses to the tune of . 1,808 crore. The government wants them to meet the target of 2000 branches by March 2011 in the unbanked areas and reduce the level of non-performing assets, or bad loans, to below 5% by the year-end.
