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Financially strong regional rural banks ( RRBs) may be soon able to tap the market through an IPO and dilute government stake in them, if the government accepts Nabard's proposal.
The apex agri and rural lender has sent an internal note to the government identifying eligible RRBs.
Nabard, the apex body for agri-lending and rural finance, has identifies about five RRBs across the country which could be able to successfully raise capital through an IPO, according to officials familiar with the development.
“ For an RRB to be eligible and successfully raise capital from the market, it has to be strong governance norms, technology and talent” said Nabard chairman Harshkumar Bhanwala at a media conference in Mumbai on Wednesday.
Nabard has given its recommendations on the possible amount , the instruments Subscribers for a successful IPO by an RRB in an internal note sent to the government, said Bhanwala
Allowing eligible RRBs to tap the market for capital makes way for dilution of government – central and state’s - stake to 51%, which the RRB Act already provides.
Currently, the central government owns 50%, state government 15% and sponsor bank, which is generally a public sector bank.
As of March 2017, there are 56 RRB in the country with a combined balance sheet size of Rs 4.7 lakh crore.
Of the 56, 50 RRBs are in profit, according to financial statements of RRBs for March 2017, released by Nabard.
The bank’s surplus or profits rose 17% in FY’17 to Rs 2950 crore.
Its loans and advances outstanding under various schemes rose 15% to Rs 3.5 lakh crore as of March’18.
Signifiantly, the bank’s balance sheet has risen 60% over the last four years, Nabard officials said.
Nabard plans to raise about Rs 40,000 crore from the market through instruments such as bonds and commercial papers in FY’19.
It had raised Rs 33,000 crore from the market in FY’18.
The final quantum of borrowing would however depend on business demand and the shortfall of the funds that the Reserve Bank releases under the rural infrastructure development fund or RIDF , which is essentially comprises the priority sector lending shortfall by foreign banks in the country.
