December 27, 2005
All Regional Rural Banks/Sponsor Banks
Dear Sir/Madam,
Special package for Regional Rural Banks (RRBs)
In the Bank's Annual Policy Statement for the
year 2005-06 (paragraph 88), it was announced to reposition RRBs as an effective
instrument of credit delivery in the Indian financial system. Towards this end,
some steps have already been taken in the recent past including amalgamation
of some RRBs. In order to extend further support to RRBs for accelerating the
flow of credit to their clientele, it has been decided to take the following
measures:
1) Enhancing resource base of RRBs
Currently, the sources of funds for RRBs are
owned funds, deposits, borrowings, refinance from NABARD, etc. In order to enlarge
resources available for a variety of purposes, especially in the context of
programme of financial inclusion, General Credit Card (GCC), etc., it has been
decided to provide additional sources of fund as under:
i) Line of credit from sponsor banks
Sponsor banks should effectively use the RRBs
sponsored by them to increase flow of credit to the rural areas. To supplement
the resources of the RRBs, sponsor banks may provide to RRBs lines of credit
at a reasonable rate of interest.
ii) Access to inter-RRB term money/borrowings
As there are no restrictions on RRBs’ access
to term money markets, it is clarified that within this framework RRBs can borrow
from/place funds with other RRBs including those sponsored by other banks, subject
to counter-party credit risk policy and limits.
iii) Access to repo/CBLO markets
RRBs can enter into ready forward transactions
in government securities with SGL/CSGL account holders, subject to the conditions
specified in IDMD Circular No.IDMD/PDRS/4779/10.02.01/2004-05
dated May 11, 2005 (copy enclosed). Further, they can participate in CBLO
market with the settlement undertaken through their Gilt Account. RRBs desirous
of participating in repos/CBLO market may approach the sponsor banks for guidance.
Sponsor banks, in turn, may actively facilitate such access and provide necessary
training to RRB staff.
With a view to equipping RRBs' staff with necessary
skill, the Reserve Bank and NABARD will help in organising training programme/s
for them in the regulatory and operational aspects of the repo/CBLO market.
Sponsor banks/RRBs interested in such training may get in touch with our Regional
Offices (RPCD).
2) Issue of credit/debit cards and setting-up
of ATMs
In collaboration with their sponsor banks or
other banks, RRBs may issue credit cards/debit cards to their constituents to
be able to provide better facilities.
In case any RRB wishes to set up an off-site
ATM in its area of operation, it may do so after assessing the cost and benefit.
Prior approval of RBI need not be obtained, but on opening of such ATMs, RRBs
should immediately inform the respective Regional Office of the Reserve Bank
(Rural Planning and Credit Department) for the purpose of getting a formal authorisation
for the place of business.
3) Opening of Currency Chests
Requests from RRBs for opening of currency chests
would be considered by the Reserve Bank, on case-by-case basis, taking into
account their financial position, compliance with SLR/CRR/inspection findings,
general position of management, grading, etc. Such requests should be submitted
to the respective Regional Offices of the Reserve Bank (RPCD).
4) Forex business