In order to improve financial level of the two Regional Rural Banks (RRBs), the Odisha Government will have to provide over Rs 100 crore during this financial year.
And more funds would be pumped to both RRBs for next four years, official sources said.
The RRBs are jointly funded by the Union Government, the State Government and sponsor banks.
The Utkal Gramin Bank(UGB) and Odisha Gramya Bank(OGB) are operating in Odisha and both these RRBs are required recapitalisation assistance from both the Union Government and the State Government.
The UGB is sponsored by the State Bank of India (SBI) and the OGB is sponsored by the Indian Overseas Bank (IOB). While the UGB is operating in 17 districts, the OGB has 13 districts as area of operations.
With the Supreme Court of India in its judgment having directed the Government of India to grant pension to the employees of the RRBs like nationalised banks, pumping of more funds is needed.
The NABARD has assessed the recapitalisation assistance to be given to both RRBs and accordingly both the Centre and the State would have to provide the assistance, said sources in Department of Finance.
The NABARD has made assessment looking at the pension liability for next five years on both RRBs. According to assessment made by NABARD, the financial support of next five years to both the RRBs will be of the order of Rs 1,961.37 crore.
While the UGB requires Rs 1,076.23 crore, the OGB needs Rs 885.14 crore for recapitalisation during next five years. Out of these amounts, the Union Government would bear 50 per cent and State Government would have to share 15 per cent, sources said, adding the sponsor bank will bear 35 per cent.
As per the Reserve Bank of India guidelines, it is mandatory for the RRBs to meet regulatory requirement of Capital to Risk Weighted Asset Ratio (CRAR) of 9 per cent.
On the CRAR position of RRBs on March 31 every year, the NABARD used to identify those RRBs, which require recapitalization assistance to maintain CRAR of 9 per cent.
Recapitalisation assistance is estimated for 2020-21 to 2023-24, which may change on the financial results of RRBs in subsequent years. The NABARD will make assessment after March 31, 2020 on the basis of financial results.
So for the fiscal 2019-20, it has been estimated that Rs 729.07 crore is required for recapitalisation of both the RRBs.
While UGB requires Rs 508.74 crore, OGB needs Rs 220.83 crore of which the Union Government would bear Rs 364.53 crore and sponsor banks would bear Rs 255.18 crore. And the State Government would have to provide Rs 109.36 crore during 2019-20 towards its share, officials said.
From 2020-21 to 2023-24, there would be fresh assessment; and, accordingly, the State Government would have to fund the amount, said sources.