The Telegraph
Since 1st March, 1999
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Govt keen to cut stake in rural banks

Mumbai, Dec. 15: The government, as a first step in its plan to exit regional rural banks (RRBs), wants commercial banks that are sponsoring RRBs to significantly increase their stake from the existing 35 per cent.

Industry sources said the finance ministry has asked the Indian Banks Association (IBA) to look into the issue of taking over such banks and come up with a comprehensive roadmap that would also address their concerns.

A communication to this effect is understood to have been sent by the finance ministry a fortnight back to the association.

The government now holds 50 per cent in RRBs, while commercial banks who are the sponsor them have 35 per cent and the rest is held by state governments.

Sources said the government now wants the commercial banks to buy its 50 per cent in the banks.

“The government feels that since RRBs are run and managed by the sponsor banks, they should take them over,” sources said.

This move comes after a similar attempt made earlier this year. Sources added that a few banks opposed the idea due to the losses posted by some RRBs.

“The MoF has now told the IBA to re-examine the earlier stand taken by some banks,” sources said.

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