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Performance of RRBs - Monitoring - RRBs in Focus
Please refer to our Circular No.176/IDD-03 dated 09 July 2018 issued vide our Ref. No. NB.HO.IDD/480/Mon-32A/2018-19 advising the criteria for identification of ‘RRBs in Focus’, the broad guidelines on preparation of Monitorable Action Plans (MAPs) and monitoring thereof.  Keeping in view the changes in the Trigger Points under Prompt Corrective Action (PCA) under Supervisory Action Framework (SAF) for Regional Rural Banks, it has been decided to change the criteria for identification of ‘RRBs in Focus’.  Accordingly, the RRBs falling under any of the criteria given below will be identified as ‘RRBs in Focus’:
 
a) RRBs having CRAR less below 10%
b) RRBs having Gross NPA above 10%
c) RRBs having Negative Return on Assets (RoA) for two consecutive years
 
2. RRBs coming under the category based on their financial performance as on 31 March 2019, may prepare Monitorable Action Plans (MAPs) as per the guidelines issued vide our above mentioned Circular dated 09 July 2018, a copy of which is enclosed for ready reference.
 
3. Please acknowledge receipt of this Circular to our Regional Office.
Yours faithfully
(Sarita Arora)
Chief 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 Total 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