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Nabard and government to come out with road map on consolidation of RRBs

Agri-lender Nabard is working with the government to bring out a roadmap on consolidation of regional rural banks (RRBs) to make them financially independent.

"We are working on consolidation of RRBs" said chairman Harshkumar Bhanwala. "Some road map is being worked out on the possibility of them accessing the market on their own. We are closely working with the government." he said.

Currently there are 56 RRBs in the country, down from over 150 in the 90s. Though Mr Bhanwala declined to give the details it is reckoned that the ideal number of RRBs should be one per state. Though currently, most of the RRBs are well capitalised, the idea is to push them to lend more and hence make them responsible for managing the capital needs as well, industry experts said.

The Nabard Act amendment Bill passed by the Parliament last week allows Nabard to almost immediately double its paid up capital to Rs 9,600 crore from Rs 4,700 crore as the amendment allows conversion of share holders' deposits into capital. Besides, transfer of RBI's 0.4% equity share to the government, its authorised capital also goes up to Rs 30,000 crore.

Nabard will also be able to raise close to Rs 40,000 crore more than as soon as the amendment gets notified, said senior Nabard officials looking after the treasury operations. It has already raised over Rs 60,000 crore from the market so far this year. In FY'19, the agri- lender plans to raise Rs 100,000 crore. It is reckoned to be the third largest borrower from the market, after the government of India and HDFC.

Its current balance sheet size is Rs 3.9 lakh crore according to Mr Bhanwala. It is expected to touch Rs 4 lakh crore by March'18 and cross Rs 7 lakh crore over the next five years. With the capital boost following amendment to the Nabard Act, it proposes to use the additional funds it raises by enhancing its focus on rural infrastructure, rural housing, farmer producer organizations.

(Source: The Economic Times)

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