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RRBs allowed to accept NRE Money, says budget
Thursday, March 01, 2007

Top priority has been given to agriculture sector by the United Progressive Alliance, present ruling coalition of political parties in India. This can be seen as one of the reasons motivating finance minister, P. Chidambaram to focus on the needs of common man in his new budget. And, it apparently reflects in his announcements on regional rural banks (RRBs).

RRBs, to treat on the par with any other scheduled commercial bank in the country, will now be permitted to accept non resident external (NRE) or Foreign Currency Non Resident (FCNR) deposits.

The government has also extended the Securitization and Reconstruction of Financial Assets and Enforcement of Securitization of Interest (Sarfaesi) Act to loans advanced by these banks, in a bid to decrease their non performing assets (NPAs).

As per the data compiled by Reserve Bank of India (RBI), the total NRE/FCNR deposits during 2007, is evaluated to be at $37,751 million as against $35,134 million in 2005-06. Moreover, the amount is to be further increased in very near future, with a number of banks offering lucrative interest rates.

The minister also proposed to recapitalize, in a phased manner, the 40 regional rural banks with negative net worth. RRB had earlier requested the finance ministry to provide them with the funds of Rs. 2000 crore, to help them to wipe out overall losses in so cleaning their balance sheets.

Envisaging the same, the budget says to establish two different funds, each containing a corpus of Rs. 500 crore. The one is the Financial Inclusion Fund, which would cater to the development cost and promotional interventions in rural areas, while the other is Financial Inclusion technology Fund, which would see to the technology adoption.

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