AIRRBEA letter to Hon’ble Finance Minister


AIRRBEA/Ref. No. 7/Date: - 05.12.2017

To Shri Arun Jaitley Hon’ble Finance Minister Government of India 134/North Block, New Delhi office@arunjaitley.com

Respected Sir,

Sub: - Suggestion for consideration in the Budget 2018-19.

We understand that the Finance Ministry under the GOI is in the process of soliciting views and suggestions for consideration and incorporation in the ensuing Budget.

We, being the oldest and the largest Trade Union in RRB Sector, representing over whelming majority of workforce of this Sector, like to submit our views and suggestions for consideration / inclusion in the Budget proposals for the ensuing year.

With regards Yours faithfully S Venkateshwar Reddy Secretary General

Copy for information and necessary action to – 1. The Joint Secretary, DFS, MOF, GOI, New Delhi. 2. The Chairman, NABARD, HO, Mumbai.

Suggestions of the AIRRBEA (NFRRBO / NFRRBE)

1. Regional Rural Banks (Gramin Banks) owe their existence to the recommendations of the committee set up in 1975 under the chairmanship of Sri M Narsimham, the then Additional Secretary, Ministry of Finance, GOI which submitted its report suggesting establishment of a set of Banks which would combine professional competence of the commercial banks and local feel and familiarity of co-operative system.

2. Accordingly five RRBs were established on 2nd October, 1975 for the first time through an Ordinance, promulgated on 26.09.1975, and the Regional Rural Banks Act, 1976 (Act 21 of 1976) was passed in February, 1976. Number of RRBs started growing in different States, and the number reached upto 196 by 1987. As per the Act, the ownership of RRBs were divided amongst the Central Government (50%), the concerned State Government (15%) and the Sponsor Bank (35%).

3. Review of the functions/impact of RRB system was carried out for the first time by Dr M L Dantwala Committee in 1978, which strongly recommended for continuation and wide expansion of RRBs, and so a large number of RRBs were opened to take care of rural credit to provide financial assistance to small and marginal farmers, share croppers, assignees of vested lands, tiny and cottage industry, small business, rural artisans etc to supplement other channels of purveying credit like commercial banks and co-operative banking.

4. Performances of these banks all through have been very encouraging and praiseworthy as commented by various committees set up by the Government/RBI/NABARD from time to time.

5. RRBs have been playing a pivotal role in implementing all social schemes like – PMJDY, PMSY, PMJY, Mudra loans, APY etc., launched by Hon'ble Prime Minister. They are serving over 30 crores of rural customers through more than 21500 branches in the nook and corner of the country. RRBs have shown overwhelming response in implementing the demonetization also, in spite of acute staff shortage and infrastructural deficiencies. Bank employees in general and RRB staff in particular are hopeful that the ensuing budget shall bring some relief to them for taking all pains in successfully implementing the demonetization task in all the difficult situations.

6. Considering the important role played by the RRBs in Rural Credit and Rural Development, the GOI should consider scrapping the RRBs Act Amendment Bill 2015, already passed by the Parliament, and drop the proposals to bring in private capital in RRB Sector. The proposal of Prof. V S Vyas Committee has been partially implemented so far, and the reorganization / restructure of these banks should be completed with formation of state level RRBs, one for the NE Region, under the apex body like NRBI (National Rural Bank of India) or NABARD, totally delinking them from the Sponsor Banks, who are the masters on one hand, and the business competitors, on the other. This restructured entity should be allowed to go for massive branch expansion with adequate recruitment of staff in lower posts to suit the requirement of Rural Credit and to provide employment to the good number of educated youth of the country side.

7. RRBs have faced untold pains in remitting the old notes into Chest Branches and were to depend on the mercy of chest branches of commercial banks to get new notes, particularly small notes for payment to poor customers during demonetization last year end. Hence, RRBs must be directed to open Chest branches on top priority to sustain the difficulties. GOI may provide for required financial support towards construction of chest branches and security in RRBs.

8. RRBs have opened over 5 thousand branches in the last five years or so, most of them are in the unpotential Rural Centers causing burden to the banks. Hence, the cost of infrastructure and staff salaries for first three years may be reimbursed to RRBs as subvention to encourage them to open more branches in rural unbanked areas.

9. To augment deposit base of RRBs, GOI may consider exemption of Income Tax on public deposits up to Rs. 5 lacs (instead of one lac to all banks). RRBs must be permitted by IT department to accept capital gains deposit from public. Rate of interest on bank deposits should be raised to match the needs of common people for their sustenance and to attract them as Bank Customers to save the Rural People from the trap of various Chit Funds and other unscrupulous agencies.

10. GOI may restore the exemption given to RRBs from paying Income Tax, rather they may be allowed to capitalize the profits or the same may be retained as provisions for priority sector lending.

11. RRBs may be provided with subvention on deposits of senior citizens in particular and all the rural deposits in general as a cushion to the elderly and poor people from the market shocks.

12. DFS, MOF, GOI may advise the PF Commissioner to treat RRBs on par with other banks in the matter of directly sending the PF amounts and monthly Pensions to the beneficiary accounts in RRBs.

13. DFS, MOF, GOI may write to all Ministries ( particularly with the HRD ministry ) to write to all institutions under their control in the country to deposit a portion of their funds with RRBs. Also, DFS, MOF, GOI may once again advise all the Chief Secretaries of State Governments to ensure deposit of their surplus fund in RRBs.

14. All Banks and Financial Institutions are flooding the market with heavy advertisements. NABARD or RRBs at state level, as a forum must also be allowed to advertise in media and other channels to survive in the market. NABARD may be allowed to bear the entire such cost of publicity.

15. DFS, MOF, GOI should ensure adequate capital support to the RRBs to match the enhanced requirement due to increased business volume, in the vital area of rural Credit.

16. GOI should allow officer/ Employees representative in the Board of Directors of the RRBs to ensure workers participation in the management as allowed in public sector banks long time ago.

17. As decided by the NIT (National Industrial Tribunal) in 1990 and upheld by the Hon’ble Supreme Court of India vide successive orders in 2001 and 2002, as also by Hon’ble High Courts of the Judicature of Karnataka and also of Rajasthan in 2011 and 2012, the DFS, MOF, GOI may withdraw the SLP No. 39288 /2012 filed against the orders of the DB of Hon’ble Rajasthan High Court in the matter of parity of Pension Benefits to RRB staff in line with the scheme of Commercial Banks, to give honour to the above NIT award and the orders of the Hon’ble Apex Court.

18. RBI should stop issuing licenses to private corporates to open Banks and the Licensing Policy (On Tap) should be scrapped.

19. The grievances of RRB staff and the issues of RRBs should be allowed to be resolved by the IBA, and pending this, the JCC (Joint Consultative Council) under NABARD may be made effective, and GOI should implement the decision of the JCC in line with the objective of establishing this forum.

20. The menace of NPA is also raising its head sharply in case of some RRBs. The sanctioning authority of big value loans should be made accountable for any willful lapses, and effective mechanism should be put in place to deal with such banks and the liable officers in such cases. Periodical review should be made to identify the persons whose loans have been written off or restructured with details of reasons / factors behind such acts. Existing laws should be amended to empower the provisions to confiscate the properties / assets of the concerned persons/ companies, as the case may be.

21. Cross selling of loans should be handled carefully by the RRB not influenced by the Sponsor Bank, and the same can be arranged in open market to fetch better return for the RRB. Management should be made accountable for any mishandling in the matter.

22. CVC guidelines on tenure of officers in sensitive posts in RRBs should be properly followed. This should be applicable for deputed officers also so that there is no scope of any vested interest allowed to grow.