Capital Support for RRBs

Like the Public Sector Banks, Regioinal Rural Banks, sponsored by different banks are also facing Capital Crunch.

1. The new pension schemes for RRBs has been approved by the Government to pay higher pension and thus to bring it at par with Pension Scheme in the nationalized banks. The scheme also covers persons who are already drawing pension.
2. These banks have created a corpus for payment of pension, by transferring funds from their profits and loss account which in-turn is an additional burden on the banks’ capital, thus making it difficult for the banks to plough back their profits.
3. The Government has now decided to provide capital support to RRBs in order to address the credit gaps faced by them.
4. RRBs are under pressure of fresh Stress caused due to inclusion of liabilities like Pension scheme and higher gratuity payable, which has resulted in erosion of their capital and constraints in releasing fresh loans.
5. It is also learnt that these banks have been advised to give priority to finalisation of their accounts and ensure completion of Statutory Audit, in order to assess their capital requirements.
6. There is a request made to RBI for amortization of their liabilities over a period of time.
7. NABARD (National Bank for Agriculture & Rural Development) which is the nodal agency for these RRBs, has asked them to provide details of Pension and gratuity liabilities, in order to find out the total capital that would be required over next five years, which ofcourse will be with the CRAR (Capital to Risk Weighted Assets Ratio ) above 9%.
8. Accordingly RRBs are now required to submit their data with due justification for the capital requirement which shall be based on the actual and projected data which shall be on the actual basis till 2019 and on the projected basis for the subsequent four years. The deadline for the same is set to be 20^th June 2019.
9. Also RRBs have been advised to make provisions towards additional liabilities.
10. There are possibilities of the Government injecting a like amount towards capital in the said banks, which also shall simultaneously take care of the 9% CRAR required.
11. It is also learnt that the shortfall in the CRAR will be compensated by Government.