Menu

Performance of RRBs - Monitoring
NB.HO.IDD /   480 / Mon-32A / 2018-19 dated 09 July 2018
Circular No. 176/IDD-03
The Chairman
All RRBs
Dear Sir
 
Performance of RRBs – Monitoring
 
With a view to harmonizing the existing monitoring guidelines to review the performance of the sub-par performing RRBs and also to align it with Prompt Corrective Action (PCA) Framework, it has been decided to take a fresh look at it.
 
2. Accordingly, all RRBs covered under the Prompt Corrective Action (PCA) as per the guidelines issued by DoS, NABARD vide Circular No. 45 dated 16 March 2018 are now covered in the revised review mechanism. In addition, RRBs which have CRAR less than 10% and GNPAs more than 10%, irrespective of the bank having accumulated losses or not, will also be covered. These RRBs will henceforth be christened as “RRBs in Focus”. Thus, RRBs meeting any of the following criteria will be identified as ‘RRBs in Focus’:
 
a) RRBs having CRAR less below 10%
b) RRBs having Gross NPA above 10%
c) RRBs having Return on Assets (RoA) below 0.25%
 
3. RRBs identified as “RRBs in Focus” will be required to prepare Monitorable Action Plans (MAPs) based on the Performance Assessment Report generated from ENSURE platform. Detailed guidelines on preparation of MAPs and the monitoring mechanism are furnished in the Annexure.
 
4. Performance of the RRBs identified as “RRBs in Focus” will be continuously monitored by the Boards of the Directors of the RRBs. Where the investment efficiency is less than 100%, the Sponsor Banks should specifically look into the investment portfolio of RRBs and guide them. At the State level, their performance will also be reviewed by the Empowered Committee. NABARD will continue the existing mechanism of reviewing performance of the RRBs at national level.
 
5. The guidelines earlier issued vide Circular No. 54/IDD-06/2016 dated March 22, 2016 on constitution of ‘Business Advisory Committee’ by specified banks stand withdrawn. 
 
6. RRBs falling under “RRBs in Focus” are advised to undertake analysis of the data analytics with respect to their financial position as on 31 March 2018 and initiate immediate steps for finalization and implementation of MAPs. RRBs may take necessary guidance from Sponsor Banks / NABARD ROs in this regard.  
 
Yours faithfully
(Sarita Arora)
Chief General Manager
Enclosure: As above
Endt. No. NB.HO.IDD /  481 / Mon-32A / 2018-19 of date.
Copy forwarded to:
1. General Manager, Sponsor Banks of the RRBs, with a request to guide RRBs in preparation of Monitorable Action Plans (MAPs) covering the parameters which brought the RRBs into the category and monitor implementation of the same.
2. Chief General Manager / General manager / Officer-in-Charge of All NABARD ROs with a request to ensure inclusion of performance of these banks in the agenda of Empowered Committee convened by RBI.
(Damodar Mishra)
Assistant General Manager
Annexure
 
1. Preparation of Monitorable Action Plans
 
While RRBs identified under PCA framework will be reviewed as per the mechanism finalized by DOS, NABARD as a part of its supervisory process, all RRBs identified as  “RRBs in Focus”, have to prepare Monitorable Action Plans (MAPs) keeping in view the areas of concern based on their performance as reflected in the ‘Performance Assessment Report’ generated in ENSURE. 
The MAP will be vetted by the respective Sponsor Bank and approved by the Board of the RRB.
The following broad framework may be adopted for preparation of MAPs:
a. Identification of the cause of deterioration
b. Corrective Action  - Depending on the nature of the deficiency, it may inter alia include the corrective actions suggestion in the DoS circular depending on the nature and the scale of deficiency
c. Preparation of time-bound action plan with the approval of the Board for improvement in its functioning and removing the identified deficiency/ies, 
The Monitorable Action may inter alia include the following:
Parameter Suggested Action
Capital Adequacy Action plan for capital restoration to reach statutory minimum of CRAR (in case of banks with CRAR <9%), and to increase capital (in case of banks with CRAR >9% and <10%)
Restriction on expansion of risk-weighted assets;
Revisit credit/investment strategy and controls 
Discussion in Empowered Committee and Guidance for improvement in the working 
Close monitoring by Sponsor Bank
NPAs Preparation of an implementable action plan with the approval of the Board for reduction of NPAs;
Revisiting the loan and recovery policies
Identification of sector and area/branches which have high percentage of NPAs/Overdue
Strengthening of follow-up mechanism of advances including loan review mechanism for large loans;
Upgradation of credit appraisal skills and systems
Effective follow-up of suit filed/decreed cases
Risk Management policies/process/procedures /prudential limit;
Discussion in Empowered Committee and Guidance for improvement in the working
Return on Assets Mobilization of more CASA deposits and proper deposit-mix with a view to reduce the cost of resources;
Increase in fee based income
Contain administrative expenses
Reduction of NPAs and contain generation of fresh NPAs
Improving ratio of earning assets to non-earning assets Increased credit and investment 
Reduction in [Current account balance + Cash] to Deposits ratio.
Reduction in ‘Other Assets’ category
Performance efficiency of credit Improving recovery
Relook into the pricing
Diversification of products
Reduction in NPA
Performance efficiency of investment Actively managing portfolio
If not trading, SLR portfolio may be SDLs instead of G-Sec.
Reduction in interbank deposits
Realizing of capital gains
Risk weighted assets Move assets to less weight category
If excess Priority Sector portfolio exists, then  asset sale/ IBPC/PSLC 
 
2. Monitoring Mechanism
 
Post preparation of MAP, RRBs may follow the following monitoring mechanism: 
 
i. Review of the action plan on a monthly basis;
ii. Monitoring of MAP by the Board of the RRB in every meeting – This should be an agenda item in all the Board meetings;
iii. Submission of the progress report to NABARD, RO after every Board meeting as approved by the Board indicating the directions of the Board and the action taken/proposed to be taken by the RRB
 
----------X----------