Why we oppose privatization of RRBs Abdul Sayeed Khan Present Ownership: - Central Government - 50%, Sponsor Bank - 35% and concerned State Government â 15%. Amendments in Question: - As per Section 3 of the RRBs Act, 1976, the Sponsor Banks were supposed to provide manpower and other support including deputed officers in the management for first five years As per Section 5 of the RRBs Act, 1976, the Authorized Capital of each RRB is Rs. 5 crores. As per Section 6 of the RRBs Act, 1976, the issued capital of each RRB shall be Rs. 1 crore, to be subscribed at the ratio 50:35:15 by the Central Government, Sponsor Bank and concerned State Government respectively. As per Section 9 of the RRBs Act, 1976, the board of directors will consist of the nominees of the Central Government, Sponsor Bank and the State Governments only. Changes being intended in the RRBs Act Amendment Bill, 2014: - In Section 3, five years condition is being withdrawn, thus allowing the Sponsor Banks to perpetuate their whimsical rule acting as master cum competitor and creating blockade to spontaneous growth of RRBs. In Section 5, the Authorized Capital is being raised from Rs. 5 crores to Rs. 2,000 crores, which is not at all necessary and relevant in the context of RRBsâ present state of functions and performance. A small dose of capital support to the extent of Rs. 5,000 to Rs.10,000 crores if provided by the present shareholders may be sufficient to make these banks much more stronger and responsive to the actual needs. As per section 6, the proposal is to raise share capital from sources other than the Central Government or the State Government or the Sponsor Bank, and to keep the share holding of the Central Government and the Sponsor Banks not less than 51%. It is also proposed that State Governments may or may not continue with ownership of RRBs. This is nothing but a clear cut route to hand over the RRBs to the hands of corporates/private sector. As per Section 9, the amendment is intended to provide for nominees of Private shareholders to the Board of Directors of RRBs according to the size of Private shareholding, ranging from 1 to 3 These are the major areas of concern not only for the RRB staff but also the democratic minded people interested for rural development and wider coverage of Financial Inclusion. Objective of setting up RRBs under the RRBs Act, 1976 RRBs started setting up on 02nd October, 1975 through an ordinance with main objective to ensure sufficient institutional credit for agriculture and other rural sectors. They mobilize financial resources from urban and semi â urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers, rural artisans and other sections of rural people. Area of operation of RRBs is limited to the area notified by Government of India covering some districts in concerned States. RRBs Act, 1976 was passed by the Parliament in February, 1976. Present Coverage: - After the process of amalgamation of RRBs as per recommendations of the Vyas Committee (2004) started in September, 2005, the number of RRBs has come down from 196 to 56. Number of Sponsor Banks has also come down from 27 to 22. Now there are more than 19,000 branches in about 640 districts throughout the country. Key indicators of RRB â as on 31-03-2014 (Unaudited) 1. No. of RRBs 56 2. No. of States covered 27 3. No. of Sponsor Banks 22 4. No. of districts covered 639 5. No. of branches Rural 14388 Semi urban 3403 Urban 1133 Metro 98 Total 19022 6. No. of Staff 79817 7. Share capital Rs. 196.00 cr 8. Share Capital deposit Rs. 6128.07 cr 9. Reserve Rs. 15283.06 cr 10. Total owned fund Rs. 21607.13 cr 11. Total borrowing Rs. 50313.51 cr 12. Total Deposit No. of account 15,42,51,076 Amount Rs. 2,38,888.02 cr 13. Total Investment Rs. 1,08,709.11 cr 14. CRR with RBI Rs. 9003.80 cr 15. Average working fund Rs. 8,74,455.20 cr 16. Total Loan outstanding No. of account 2,97,43,122 Amount Rs. 2,05,730.12 cr 17. CD Ratio 86.12 18. ID Ratio 45.51 19. Productivity per Branch Rs. 23.37 cr Per Staff Rs. 5.57 cr 20. Total loan issued No. of account 1,55,67,065 (During the year) Amount Rs. 1,64,529.47 cr 21. Gross Profit (before Tax) Rs. 3949.90 cr 22. Net profit (after tax) Rs. 2714.86 cr 23. Tax paid (or net provision) Rs. 1235.03 cr 24. Gross NPA 4.58 % 25. Net NPA 3.20 % 26. Accumulated loss Rs. 944.82 cr 27. Recovery % as on June, 2013 81.88 % Latest figures relating to flow of Agri - Credit in 2013-14 Total loan disbursed in 2013-14 â Rs. 7, 23, 225 crores. Shares â - Co-operative banks through about 1 lakh outlets â Rs. 1, 18, 422 crores (16.37%) - Regional Rural Banks through about 19,000 outlets â Rs. 83,307 crores (11.51%) â with many restrictions in number of outlets in allowing service to big borrowers, in area of operations etc. - Commercial Banks through about 40,000 outlets â Rs. 5, 21, 496 crores (72.10%) In case of RRB, cumulative growth in agri credit between 2009-10 to 2012-13 is highest among all three channels, at 22%. Comments of Dr. C Rangarajan Committee on Financial Inclusion (January, 2008): - ââ¦â¦..RRBs were originally created to cater to neglected sections/areas as they were expected to have sound finance management combined with local feel and familiarity. With the amalgamation of RRBs they have acquired a critical mass in terms of financial strength to widen and deepen their outreach with the requisite strength having been developed, RRBs are the best suited vehicles to widen and deepen the process of financial inclusion. However, utmost care must be taken to ensure that in the process of fulfilling the socio economic objective of financial inclusion, RRBs do not again fall into the vicious circle of deteriorating financial performance and deviation from their mandate. RRBs may be provided adequate promotional and developmental assistance to contribute substantially to financial inclusion in a way that the business generated out of inclusion efforts add positively to their performance.â (Page no. 65, Para 5.25) This committee strongly recommended for various types of support to the RRBs by the GOI/NABARD/RBI/Sponsor Bank including the capital support to make them more effective in the task designed for them. This Committee did not think/suggest of diluting the ownership pattern to privatize the RRBs. Special Features of Regional Rural Banks: - ⢠In rural areas, RRBs account for 37% of total offices of all Scheduled Commercial Banks (SCBs). ⢠91% of the total workforce in RRBs is posted in rural and semi urban areas as compared to 38% for other SCBs. ⢠In rural areas, RRBs account for 31% of Deposit Accounts of all SCBs. ⢠In rural areas, RRBs account for 19% of the Deposit amount of all SCBs. ⢠The lower average deposit amount per account in RRBs as compared with other Commercial Banks implies their better reach to small depositors. ⢠The share of RRBs in case of Loan Accounts is an impressive 37% in rural areas. ⢠In rural areas, RRBs account for 34% of the branches of all the SCBs in North East, 30% in the Eastern Region and 32% in the Central Region. It may be noted that these regions manifest Financial Exclusion of a high order. ⢠Of the total Self Help Groups (SHGs) credit linked by the banking system more than 30% of the linkage has been done by RRBs. More significantly, the more backward a region greater is the share of RRBs. ⢠In the North East the share of SHGsâ linkage is 56% of RRBs, in the Central Region it is 48% and in the Eastern Region it is 40%. ⢠RRBs have been playing a significant role as SHPI (Self Help Promoting Institution) with grants from NABARD. ⢠According to a report it has been indicated that exclusion in the Central, Eastern and North Eastern Regions is more acute. These regions have a concentration of 64% of the excluded farmer households in the country. There are 256 most excluded districts identified by the Rangarajan Committee, and these are spread over 17 States and 1 Union Territory. The role of RRBs is significant in these priority districts. (Taken from letter of Sri N P Mahapatra, General Manager, NABARD, Mumbai, published in EPW of 16-08-2014) Role of RRBs in Prime Ministers Jan Dhan Yojana: - It is estimated that nearly 2 crore accounts under this programme have been opened by 56 RRBs collectively, highest amongst all banks in India, even it is much ahead of total number of accounts opened by State Bank of India, the largest Bank of the country. Role of RRBs in other Government Sponsored Schemes: - RRBs have been playing pioneering role in case of implementing various Government Sponsored Schemes (both Central/State Government) like MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), NRLM (National Rural Livelihood Mission, now in place of SGSY), Old Age Pension, Widow Pension, Poor/meritorious Studentsâ Stipend etc. and many other such important schemes relating to vulnerable sections of rural population. Role of Private Banks in India: - All concerned are aware of the fact that private and foreign Commercial Banks have no contribution in the above areas worthy of mention. They are mainly confined to the business in the urban areas solely with profit motive. There are allegations of violation of banking rules and norms on the part of private banks thus characteristics of private banking in our country has been already exposed before the general public. Even there are examples of serious allegation of corruption in the rank and file of the private banks and consequent failure of concerned banks. Public sectors banks have been put in place, in most cases, to take over such failed banks to save the customers of these Private Banks. Public Opinion: - It is largely believed and accepted that performance of RRBs within the given situation is noteworthy and praise worthy mainly due to the fact that these Banks are in the Public Sector. And it is also a fact that RRBs need capital support, other supports from the present shareholders, mainly the Central Government and not from any other private agencies or corporate/private sector. Capital support: - Recapitalization of Public Sector Banks has been a regular feature in case of Public sector Banks in India. According to a report, amount of expenditure on recapitalization of PSBs has been shown at Rs. 74,300 crores for the period from 2000-01 up to 2013-14, the figures for 2000-01, 2003-04, 2004-05 and 2006-07 are not available and not included herein. So the total figure of recapitalization of PSBs for last 14 years by the Government of India may be around Rs. 90,000 crores. Recapitalization of RRBs: - But total amount of capital support in the name of Share Capital Deposits provided to RRBs in the entire lifetime of the RRBs is around Rs. 6,000 crores only. Report of Dr. K C Chakraborty Committee: - Dr. K C Chakrabarty Committee has recommended to adjust the share capital deposit provided to RRBs against the accumulated loss till the year 2010, and though the Government has accepted the same, the action has not been taken so far to implement the decision. Actual Need: - The need of the RRB system is to be ascertained on the basis of its present financial position. The RRBs have now an amount of Rs. 15,283 crores as Reserve, that means as Accumulated Profit. There is an amount of Rs. 6,128 crores as share capital deposit. But paid up share remains only Rs. 196 crores. On the other side, total accumulated loss now stands at Rs. 945 crores only. So if the accumulated loss is adjusted against the share capital deposit, there will be remaining share capital deposit of around Rs. 5,200 crores. Firstly this amount may be converted to the capital base i.e. Share Capital and then another dose of Rs. 5,000 to Rs.10,000 crores may be provided to the capital fund of RRBs by the present share holders. Presently all RRBs are profit making. Gross profit before tax as on 31-03-2014 is at Rs. 4000 crores and net profit after tax is Rs. 2715 crores. So RRBs are supposed to not only to stand on their own feet, rather they may be much more stronger in maintaining CRAR level of even more than 11% if above mentioned small dose of capital infusion is allowed by the present shareholders to make them stronger and purposeful. As a part of neo liberal policies pursued by the central government, RRB Act Amendement Bill, 2014 dated 10 December 2014 was placed in the Parliament on 18-12- 2014, and the Lok Sabha passed the Bill on 22-12-2014 after some debate, ignoring the opposition of all the RRB unions in particular and all other bank unions as also many Honourable MPs of various political parties in general, as observed when similar Bill was placed on 22-04-2013 by the then FM Shri P Chidambaram. We understand that all RRB unions have already come out with strong protest against the Bill this time also and there is a proposal for joint movement in the matter including Strike action. We appeal to all concerned to support the protest action to save the RRBs from privatisation.
Posted on: Wed, 24 Dec 2014 16:32:34 +0000
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