The Orissa government has requested the Centre to release its entire contribution towards the share capital assistance for recapitalisation of three Regional Rural Banks (RRBs) in the state.
These three RRBs are Kalinga Gramya Bank (sponsored by Uco Bank), Utkal Gramya Bank (sponsored by the State Bank of India) and Baitarani Gramya Bank (sponsored by the Bank of India).
The state government has already released 50 percent of its share in the scheme to these RRBs whose networth were in the negative by 31 March 2007.
Sources said, the total recapitalisation requirement was estimated at Rs 375.59 crore. Out of this the share of Government of India (GoI) is Rs 187.8 crore and the contribution of the state government is Rs 56.33 crore.
The remaining Rs 131.46 crore was to be contributed by the sponsoring banks. The Orissa government has released Rs 28.17crore for the recapitalisation of these RRBs which is 50 percent of its contribution.
The RRBs have already signed the memorandum of understanding (MoU) with the sponsor banks, the Orissa government and the National Bank for Agriculture and Rural Development (Nabard) for recapitalisation of their banks as per the format designed by the Union government.
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Through this agreement, the RRBs have agreed to wipe out the accumulated loss, improve the recovery of loans, reduce net NPA, introduce new product and services, upgrade technology, enhance deposits and implement the sustainable viability plan, sources added.
In a letter to the ministry of finance, the state government has stated that expeditious measures may be taken to release the share of the Union government so that the state government can release the remaining 50 percent of the contribution to the RRBs during the current fiscal. It may be noted, the state government has taken in principle decision to infuse fresh capital of about Rs 56.33 crore in three RRBs having negative networth as of March 31, 2007.
It has made the required budgetary provisions in the supplementary budget for 2008-09. The negative networth of Kalinga Gramya Bank,Utkal Gramya Bank and Baitarani Gramya Bank taken together are estimated at around Rs 370crore. Kalinga Gramya Bank, sponsored by Uco Bank is estimated to have a negative worth of the Rs.223 crore. Similarly, the State Bank of India (SBI) sponsored Utkal Gramya Bank has a negative worth of
Rs 143 crore, and and Bank of India sponsored Baitarani Gramya Bank has a negative worth of around Rs 3 crore by the end of 2006-07.
The recapitalisation scheme was introduced by the Union government as the regional rural banks in various states have eroded their capital base significantly and needed financial assistance to carry out fresh business.