Dangerous decisions of GOI against RRB system

Meeting of selected RRB chairmen was held on 02.07.2012, under the chairmanship of Sri.D.K.Mittal Secretary, Department of financial services to review the financial performance of RRBs. The minutes of the meeting is indicating clearly the  deceptive and dangerous decisions of the govt.of India.

We reproduce the minutes here:

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MOST IMMEDIATE

F. No. 7/8/2011- RRB

Government of India

Ministry of Finance

Department of Financial Services

New Delhi dated the 5th July, 2012

Subject: Minutes of the meeting held on 2.7.2012 under the Chairmanship of Secretary (Financial  Services) to review the financial performance of Regional Rural Banks (RRBs)

Sir/Madam,

Please find enclosed copy of the Minutes of the captioned meeting for information and necessary
action.

Yours faithfully,

(Suresh C.Arya)
Senior Research Office


Minutes of the meeting held on 2.7.2012 under the chairmanship of Secretary (Financial Services) to review the financial performance of Regional Rural Banks (RRBs)

A meeting was held under the Chairmanship of Secretary (FS) on 2nd July, 2012 with Chairmen of RRBs sponsored by Andhra Bank, Allahabad Bank, Bank of Maharashtra, Dena Bank, Indian Bank, Indian Overseas Bank and Union Bank of India. The Executive Directors of NABARD, Andhra Bank, Allahabad Bank, Bank of Maharashtra, Dena Bank, Indian Bank, Indian Overseas Bank and Union Bank of India also participated in the meeting. List of participants is annexed.

2.The agenda of the Meeting was as under:

Analysis of RRBs in terms of CD Ratio, Gross/Net NPA%, Net Worth, Productivity (business perbranch and per employee), Profitability (Net Profit/Loss per employee), Return on Asset(ROA), Cost to Income Ratio (excluding interest paid), Cost of Funds & Recovery percentage

Branch expansion plan of RRBs in 2011-12 and 2012-13 and staff to be commensurate with the business plan so that expansion does not result in increase in number of loss making branches;

Plan of Action for e-governance, HR Issues and Business Process Reengineering (BPR);

Introduction of system generated NPAs in RRBs by March, 2012;

Seamless Integration of sponsor banks and RRBs(CBS, cheques/drafts, ATM services, BSc, HR practices, training and capacity building of RRB staff, RRB employees on deputation to sponsor banks)

Status of usage of alternative channels of payment system/NEFT/RTGS in RRBs;

3. The discussions were focused on the following parameters:

(I) HR issues:

After detailed deliberations, the following was reiterated on the HR issues:

(i) The sponsor banks should depute AGM and Chief Manager level officers from specialized cadres like Risk Management, IT, HR, Legal, Industrial Finance and Treasury Operations, etc to develop expertise within RRBs staff in these areas. Specific officers should also be identified in Sponsor Banks with whom RRBs can discuss on above subjects and take necessary guidance.

(ii) At the time of deputation of staff to RRBs, quality of the staff should be ensured by the sponsor banks.

(iii) Only willing staff of RRBs should be deployed in Sponsor Bank to have better exposure to modern banking and functioning of their Sponsor Bank. If RRB staff is not willing for deputation at distant branches of Sponsor Bank, they may be deployed in nearby branches of sponsor bank. Youngsters may be motivated to go on deputation considering their easy flexibility to move and the long term relationship they are likely to have with the RRBs.

(iv) The process of deputation, if not completed till now, be done by 15th July, 2012.

(v) (a) RRBs staff should be provided training on regular basis and sponsor banks should reserve at least 10% seats in their training centers for RRB staff. Specific programmes for RRB staff should also be organized.

(b) Special attention should be given towards development of behavioral skill and expertise in the
areas like Risk Management, IT, HR, Industrial Finance and Treasury Operations, etc within RRBs staff.

(c) Considering that RRBs have recently migrated to CBS, their staff needs to be provided intensive training on use of CBS and generation of MIS.

(d) Training programmes could also be organized by the RRBs (having their own training centers) with faculties being provided from the training centers of the sponsor banks. Training programmes could also be conducted through Video Conferencing.

(vi) In order to reduce the potential of frauds, biometric password devices should be installed in RRBs, as is being done in Public Sector Banks. The sponsor banks should take into account the requirement of their RRBs also while making arrangement for installing the system in their bank.

(vii) While considering the requirement of additional staff, RRBs should take into account productivity norms and need of redeployment. Any RRB which has per employee net profit less than 5 lakh must not recruit more than one-fortieth of present strength in any year.

(viii) The issue regarding delegation of powers of appointing authority for the RRB may be examined and a proposal may be put up. Similarly, in case review in promotion criteria is required the proposal may be put up.

(ix) With the introduction of technology such as ATMs, RRBs will require lesser staff strength. Therefore, RRBs should assess staff requirement carefully. It should be need based and value based and there should not be indiscriminate recruitment.

(x) Thorat Committee recommendations are separately being reviewed. in view of technological advancement and CBS, the norms prescribed by the Committee are no longer relevant. Sponsor Banks also need to have a fresh look at succession plan prepared by the RRBs.

(xi) Eligibility criteria for promotion with regard to length of service should be changed as applicable in Nationalized Banks. RRB Section, DFS will initiate necessary proposal in this regard.

(II) IT related issues:

With a view to augment the use of modern technologies and minimize overhead expenditure in RRBs, the following was advised:

(a) The latest version of CBS and all CBS modules should be made available to RRBs. The sponsor bank should take up 1 or 2 RRBs for implementing full e-governance.package on a pilot basis and after successful rollout of the pilot; it should be implemented in all RRBs in a time bound manner and be completed in six months.

(b) The data centers should be managed by the sponsor banks. No staff from RRBs should be posted at data centers. The IT consultant/service providers should provide requisite manpower at the data center/RRBs.

(c) ‘Ultra Small Branches’ (USB) should be opened wherever opening of a regular brick and mortar branch is not considered viable. The USB could be converted to regular branch once the business reaches the desired level.

(d) ‘Ultra Small Branches’ should be opened in all FI villages. VPN connectivity to the CBS should be provided by the sponsor bank. Performance of USBs is to be monitored through CASA deposits, loan accounts and improvement in recovery.

(e) There should be accelerated rollout of ATMs by RRBs as RFPs for all clusters have been finalized. It should be the endeavor of all RRBs to have a ATM/Cash Dispenser at all the branches so that the load on the branch staff gets reduced and the customers have the convenience of anytime withdrawal. The vendor selected may also be impressed upon to install SNA.

Efforts should be made to issue Rupay debit card to all customers. Sponsor banks will issue these cards with logo of RRBs.

Further, all customers having a current account be encouraged to use NEFT and each branch should have customer campaign workshops to educate and advise them to use e-payment structures.

This may be done at least once a month and Branches dealing with 70 to 80% business is monitored closely.

(f) Use of “Citrix” software may be examined to increase the speed of connectivity for CBS system.

(III) Operational issues

The targets assigned to RRBs under per employee profit, CD Ratio, gross NPA, non-interest
income and loss assets were discussed with each RRB. The following was observed in this regard:

(i) All the RRBs and sponsor bank assured that the year-wise targets will be achieved within the given timeline.

(ii) Chairmen of RRBs were advised that the targets should be discussed with staff and officers of the bank so that there is full commitment to achieve these targets.

(iii) The RRBs with comparatively poor performance under per employee net profit, CD ratio and Gross NPA, were advised to work hard to achieve the given targets. The EDs of Sponsor Banks were advised to pay special attention towards the performance of RRBs under the said parameters and to ensure that the given targets are met.

(iv) To improve the CD Ratio, investment credit should be encouraged in RRBs. Sponsor banks should put in place proper guidelines for RRBs in this regard. Same investment policy should be adopted by RRBs and sponsor banks. Joint lending by sponsor banks and RRBs with RRBs share at about 20 to 25% should be undertaken for loans upto Rs. 10 crore sanctioned in their operational area.

(v) Policy for Gold/Silver loans may be evolved in RRBs keeping in view the prudential policy of sponsor banks. Branches having appropriate security and infrastructure should be identified and customers from other branches can be guided to these branches for such loans. Loans for 2 wheelers and 4 wheelers should also be given to improve CD ratio.

(vi) RRBs should also promote SHGs to improve CD ratio as well as safe lending in comparison to other sectors.

(vii) ED, NABARD informed that guidelines for linking limit of refinance with CD Ratio have been issued.

(viii) RRBs should ensure that no branch remains loss making after 12 months of operation. Loss making branches should be shifted/replaced with an ultra small branch or should turn around. New branch must become profitable within one year of operation. It was also advised that Branch Manager be posted 6 months in advance to enable him to take all preparatory steps for business development so that the branch becomes profitable within one year of operation.

(ix) RRBs should increase non-interest income to enhance their profits.

(x) Treasury operations of RRBs should be handled by the sponsor banks. However, one officer of RRB be trained to work with the sponsor bank treasury management team.

(xi) ‘No-frill’ accounts should be converted to full fledged accounts in a year subject to fulfillment of KYC requirements.

(xii) Cases of frauds perpetuated by the staff must be dealt with promptly and exemplary punishment given. The recovery of amounts should be the first priority.

(xiii) Overall ambience of RRBs needs to be improved. RRBs have been advised that at least 10% of the branches should be taken up every year for improving their overall ambience in terms of upkeep, cleanliness, customers’ convenience, greenery, etc. This may be done by adopting simple low cost methods. Look and feel of branches must improve and be brought at par with private banks.

xiv) To reduce NPAs, regular follow up of loans, particularly the small loans is necessary  because the massive portion of NPAs is of the smaller loans.

(xv) The Chairmen of RRBs shall personally be responsible for performance of the RRBs.

(xvi) Campaign on opening an account of each family in all villages, KYC and CBS updation may be monitored closely.

(IV) Operational Integration with sponsor banks:

With a view to ensuring seamless banking transactions between sponsor bank and their RRBs,
banking operations of RRBs is to be functionally integrated with their sponsor banks. The following was reiterated in this regard:-

A. The RRBs should have a campaign explaining the benefit of NEFT facility to their customers.

B. Cheques/demand drafts issued by RRBs should be treated at par with that of their sponsor banks and clearance charges should be levied at par with those for sponsor bank’s customers.

C. ATM services provided by the Sponsor Banks and/or RRBs should be treated as of the same
bank. No charges should be levied on RRB for using the services at such ATMs by its customers.

D. Role of Local Head Offices be clearly mentioned by a circular to avoid gaps and overlaps.

E. Customers may be guided for e-payment.

4. The RRBs are to be treated at par with commercial banks by State Governments for all programmes.

The sponsor bank will take up the matter with the concerned State Governments. Department of
Financial Services has already written to State Governments and various Ministries of Govt. of India in this regard. Chairmen of RRBs were also requested to inform about the names of specific organizations which are insisting on keeping deposits only with Nationalized Banks so that the matter can be taken up with them.

5. On a request from RRBs, it was decided that the issue of branch opening at the same place by both Sponsor Bank & RRB at district HQ may be decided by the banks in mutual consultation with each other. However, for places other than the District HQs, the existing guidelines of DFS will continue.

6. The meeting ended with vote of thanks to the Chair.

Annex

List of Participants

Meeting held on 2.7.2012 under the Chairmanship of Secretary (Financial Services) to discuss the financial performance of Regional Rural Banks (RRBs) sponsored by Central Bank of India, Bank of Baroda, Corporation Bank and Vijaya Bank.

Department of Financial Services:

1. Shri D.K. Mittal, Secretary (FS)- in Chair
2. Shri Sunil Soni, AS(FS)
3. Shri Umesh Kumar, Joint Secretary (BA)
4. Shri Sandeep Kumar, Director (FI/RRB).
5. Shri Anil Kumar Sharma, SO(RRB)

NABARD and Sponsor Banks

1) Shri S.K. Mitra, ED, NABARD.
2).Dr. Kummur, CGM, NABARD
3) Shri K.K. Misra, ED, Andhra Bank
4) Shri T.R. Chawla, ED, Allahabad Bank
5) Shri C.V.R. Rajendran, ED, Banak of Maharashtra
6) Shri Ashok Dutt, ED, Dena Bank
7) Shri Rajeev Rishi, ED, Indian Bank
8) Shri A.D.M. Chavali, ED, Indian Overseas Bank
9) Shri S.S. Mundra, ED, Union Bank of India

Regional Rural Banks

1. Shri S. Gaur Chairman, Allahabad UP Gramin Bank
2. Shri M. Gopala Krishna, Chairman, Chaitanya Godavari Grameena Bank
3. Shri S.P. Kohli, Chairman, Durg Rajnandgaon Gramin Bank
4. Shri G.K. Paneri, Chairman, Dena Gujarat Gramin Bank
5. Shri S.N. Tripathy, Chairman, Kashi Gomti Samyut Gramin Bank
6. Shri Philip D’Silva,Chairman, Maharashtra Gramin Bank
7. Shri D.K. Nanda,Chairman, Neelachal Gramya Bank
8. Shri M. Xavier Thilagaraj, Chairman, Pandyan Grama Bank
9. Shri D. Devaraj, Chairman, Puduvai Bharthiar Grama Bank
10. Shri G. Rangarajan, Chairman, Pallavan Grama Bank
11. Shri PVSTR Seshagiri Rao, Chairman, Rushikulya Gramya Bank,
12. Shri S.K. Sinha, Chairman, Rewa Sidhi Gramin Bank
13. Shri K.S. Sudhakara Rao, Chairman, Saptagiri Grameena Bank
14. Shri J.K. Swain, Chairman, Sharda Gramin Bank

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AIRRBEA has reviewed the minutes of the meeting and reacted immediately on some key issues. Com.D.K.Mukherjee, Secretary general, AIRRBEA circulates with the following message:

 "AIRRBEA will fight against all such anti-employee and anti-RRB actions and decision of GOI."