Statement of Finance Minister Shri P. Chidambram on Fiscal Roadmap and Consoildation

STATEMENT OF THE UNION FINANCE MINISTER SHRI P. CHIDAMBARAM ON FISCAL ROADMAP AND CONSOLIDATION

PRESS RELEASE, DATED 29-10-2012

Please find below the text of the Statement of the Union Finance Minister Shri P. Chidambaram on Fiscal Roadmap and Consolidation made here today by him in a Press Conference:

"Shortly after I assumed office, I issued a statement on August 6, 2012 outlining the steps that would need to be taken to meet the challenges that face the Indian economy. At the top of the list was the need for fiscal consolidation. I had referred to the appointment of a Committee chaired by Dr. Vijay Kelkar to assist the Government in formulating a path of fiscal consolidation. The Committee's report was put on the website a few weeks ago.

The Economic Slowdown

In 2011-12, the slowdown in the world economy, lower growth in India, higher inflation, lower tax receipts and increased expenditure (including subsidies) led to considerable fiscal stress. At the end of the year, the fiscal deficit was at 5.8 per cent of GDP. Government recognised that, if immediate corrective steps were not taken, the economy may go into a cycle of low growth, high inflation and high deficit. That would be unacceptable, given the need to generate jobs and incomes for a large population, most of whom are young. Therefore, on behalf of the Government, I reiterated our commitment to bring the economy back on the high growth trajectory. Towards this end, some difficult but crucial decisions were taken recently. It is a matter of satisfaction that, despite the additional burden on certain sections of the people, by and large, the people have understood the imperative need for such difficult decisions.

The Report of the Kelkar Committee

The Kelkar Committee has cautioned us that a business-as-usual scenario for the current year may lead to the fiscal deficit rising to 6.1 per cent of GDP. This would have grave consequences for the economy is, therefore, totally unacceptable. The Committee has recommended a number of reform measures in taxation, disinvestment and expenditure. On the taxation side, the Committee has strongly advocated a transition to the Goods and Services Tax (GST) and a quick review of the Direct Taxes Code (DTC) before its introduction and passing in Parliament. Besides, the Committee has recommended administrative measures to improve tax collection. On disinvestment, the Committee has suggested a number of new models for disinvestment and has also urged Government to disinvest its residual stake in some companies that were privatised earlier. On the expenditure side, the Committee has suggested rationalisation of schemes and strict control and monitoring of expenditure. These recommendations are wholesome and have been accepted by the Government.

The Department of Revenue and the Department of Expenditure have initiated action on the recommendations of the Committee. The Department of Disinvestment has obtained approval of the Cabinet for disinvestment in Hindustan Copper Ltd., NALCO, SAIL, RINL, BHEL, OIL, MMTC and NMDC. Government expects to realise the budgeted receipts under 'disinvestment' and 'non-tax receipts'. Every effort will also be made to realise the revenues budgeted under 'tax receipts'. Government also expects to be able to contain and economise on expenditure, both on the Plan and the non-Plan side. While funds will be made available for essential expenditure, especially capital expenditure, every effort will be made to avoid parking or idling of funds. As regards subsidies, Government will also increasingly rely on Aadhaar-enabled direct cash transfers of merit subsidies to eliminate duplication or falsification.

The Twin Deficits – CAD and FD

Government is determined to address the twin challenges of current account deficit (CAD) and fiscal deficit (FD). During 2011-12, the CAD increased to USD 78.2 billion or 4.2 per cent of GDP. The Department of Economic Affairs, in consultation with the RBI, has projected a CAD of USD 70.3 billion in 2012-13 or 3.7 per cent of GDP. Any moderation in CAD would be welcome. Government is confident that the CAD will be fully financed by capital inflows, and expects that a substantial part of it will be in the form of Foreign Direct Investments (FDI), Foreign Institutional Investments (FII) and External Commercial Borrowings (ECB).

The Fiscal Consolidation Plan

As regards the fiscal deficit (FD), taking into account the steps outlined above and other steps that are being implemented or contemplated, Government has decided to adopt the following plan of fiscal consolidation during the period of the 12^th Plan, i.e. from 2012-13 to 2016-17.

	Year	Fiscal Deficit (%)
	2012-13	5.3
	2013-14	4.8
	2014-15	4.2
	2015-16	3.6
	2016-17	3.0

The burden of fiscal correction must be shared, fairly and equitably, by different classes of stakeholders. However, as I said on August 6, 2012, "the poor must be protected and others must bear their fair share of the burden." In particular, I would like to emphasise that all the flagship programmes designed to help the poor and bring about inclusive development will be fully protected under the revised fiscal consolidation plan. As fiscal consolidation takes place and investors' confidence increases, it is expected that the economy will return to the path of high investment, higher growth, lower inflation and long term sustainability.

Our impressive record during 2004-08 should serve as a constant reminder that with sound policies and determination we have the capacity to achieve our goals. Government seeks the support of all sections of the people in implementing the fiscal consolidation plan as well as other measures to reform and strengthen the economy".

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Hike in Diesel Price by Rs. 5/- per liter with LPG restriction

The government has increased the price of diesel by five rupees per litre. However, there will be no increase in prices of petrol and PDS kerosene. The Cabinet Committee on Political Affairs (CCPA) in its meeting chaired by Prime Minister Dr. Manmohan Singh has also decided to restrict the supply of subsidized LPG cylinders to each consumer to six per year.

The new prices will be effected from midnight today.The revised Retail Selling Price of Diesel in Delhi will be approximately 47 rupees per litre, however, branded Diesel will be sold at the market rate. An official release says that the subsidized cylinders will continue to be available at 399 rupees per cylinder in Delhi , the market rate of LPG cylinders at non-subsidized rates will be notified by Oil Marketing Companies, OMCs on monthly basis.

The above decisions will reduce the under-recovery of OMCs by about 20,300 crore rupees and the under-recovery for 2012-13 will be about 1,67,000 crore rupees which is more than the under-recovery of 1,38,541 crore rupees incurred by OMCs during 2011-12. 

Congress today said that the government has reluctantly taken the decision to increase the price of diesel. Talking to All India Radio, party spokesperson Rashid Alvi said that the price of diesel and other petroleum products depends upon international market which are increasing.

Railway Minister and Trinamool Congress leader Mukul Roy has expressed his unhappiness over hike in diesel price.

Petrol Rate increased by Rs. 3.14 per Litre.

It is surprise news that now petrol rate has been increased Rs. 3.14 per Litre from Thursday midnight w.e.f. 15.09.2011.  Not only you everyone is shocked to hear this type of increase in Petrol.  

State-owned oil firms have raised petrol prices by 3.14 rupees per liter . A top executive of Indian Oil told AIR that the hike will be effective from midnight. With this, petrol in Delhi will now cost 66.84 rupees a litre. Top Executives of the three oil marketing Companies, Indian Oil, Bharat petroleum and Hindustan Petroleum said that the oil firms were incurring losses of around 2850 crore rupees on petrol. Besides this, an official of Oil Ministry said that the three firms are losing 263 crore rupees per day on selling diesel, domestic LPG and kerosene below cost.

Our Correspondent reports that State owned Oil companies started suffering more losses following increase in the cost of crude oil and depreciation of rupee in the international market.

IT : Filing appeals to ITAT - New Instructions Issued

INSTRUCTION NO. 08/2011 [F NO. 279/MISC./M- 43/2011-ITJ], DATED 11-8-2011

With a view to streamline the process of filing appeals to ITAT and in suppression of the existing Instructions on the subject in general, and Instruction No. 1274 dated 10-8-1979, Instruction No. 1353 dated 9-9-1980, Instruction No. 1387 dated 3-3-1981, Instruction No. 1493 dated 18-11-1982, Instruction No. 1570 dated 4-7-1984, Instruction No. 1894 dated 16-6-1992, and Instruction No. 1921 dated 23-1-1995, in particular, the following Instructions are issued herewith for compliance by all concerned:

Responsibility for Filing of Appeals to ITAT

2. Subject to the Instructions issued by the CBDT for the time being in force on monetary limits for filing appeals under section 268A, the jurisdictional CIT shall be the authority to decide whether to contest an order of the CIT(A), in the light of the facts and circumstances of a particular case and the statutory provisions. While taking decision in the matter, he shall, inter alia, take into consideration reports of the authorities below. Once the CIT communicates his decision to contest a particular order of CIT(A), it shall be the responsibility of the Range Head to ensure timely and proper filing of appeal in the ITAT and consequential follow up actions. The actual filing of appeal is to be ensured by the Assessing Officer (AO).

Time Lines for Filing of Appeals in ITAT under section 253 of the Act

3. Time lines, indicating clearly the responsibilities of each level involved in the process, for filing appeals to ITAT have been laid down in Annexure-I to this instruction for strict adherence by all concerned.

4. Appeal Effect and Scrutiny Report

   i.  On receipt of the order of the CIT(A), the AO shall give appeal effect promptly and properly. The Range Head shall monitor correctness and timely appeal effect in respect of orders of CIT(A).

  ii.  Any pendency in regard to the appeal effect beyond one month shall be reported by the Range Head to the CIT in the DO reporting monthly activities of the Range, along with reasons for the delay.

 iii.  With a view to provide relevant inputs to the decision making authority for filing appeals to ITAT, a format for scrutiny report is prescribed herewith at Annexure-II.

 iv.  In respect of appeals decided in favour of revenue, the AO shall submit only Part-I of the proforma in Annexure-II to the Range Head and there will be no need to fill in other parts of the proforma in such cases.

5. Quality of Appeals

   i.  The CsIT shall ensure that appeals to ITAT are filed only where there is proper justification. Orders of CIT(A) on factual issues should be accepted unless the findings are perverse.

  ii.  While giving comments / recommendations or taking decision to contest CIT(A)'s order, the officers concerned shall, inter alia, ensure that the following issues have been taken into consideration:

 (a)  Facts of the case and basis of addition / disallowance are clearly brought out.

 (b)  Reasons for granting relief by the CIT(A) on the relevant issues are clearly spelt out.

 (c)  The reasons as to why the CIT(A) was not justified in recording the findings of fact or law on each issue are clearly brought out. Evasive stand or ambiguous language is to be avoided.

 (d)  If any factual finding by CIT (A) is inconsistent with or contrary to the material on record, the relevant material should be clearly identified to show perversity.

 (e)  Cogent reasons for the decision to file appeal on relevant issues are properly and clearly recorded by the CIT, as this will constitute the basis for further litigation in appropriate cases.

 (f)  The grounds of appeal arising out of the order of CIT(A) are carefully drafted to clearly spell out the grievance of the department and the relief sought.

 (g)  In case of mixed question of facts and law, the grounds of appeal should clearly bring out specific legal and factual issues to be contested.

 (h)  The grounds are precise and not argumentative.

  iii.  Along with authorization memo under section 253(2) and grounds of appeal, the CIT shall send a copy of comments of Range Head and reasons for his own decision authorizing appeal to the AO for his record and guidance.

  iv.  In case appeal has not been authorized against adverse order of the CIT(A), the decision should be conveyed to the AO along with copy of scrutiny report containing reasons for acceptance.

6. Proper Judicial Record Management System

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More than $2 billion of Indian in Swiss Banks

     The Swiss central bank has estimated the total liabilities of Swiss banks toward Indian account holders at about $2.5 billion in 2010, as against the $1.5 trillion figure projected by some political parties and non-governmental organisations.

     “The Swiss National Bank can only say that liabilities of Swiss banks toward Indian holders according to our annual statistics... were Swiss francs 1.945 billion ($2.5 billion)in 2010,” the spokesperson for the Swiss National Bank president, Walter Meier, told PTI.

      He said the liabilities of Swiss banks toward Indian account holders was 1.965 billion Swiss francs ($2.7 billion) in 2009 and 2.4 billion Swiss francs (about $3 billion) in 2008.

    In the aftermath of the financial crisis that engulfed the West after the collapse of Lehman Bank in the United States in 2008, Swiss private banks, particularly their largest bank, UBS, had suffered huge losses.

     Several legal cases against Swiss banks, especially UBS, for parking funds illegally subscribed to by wealthy US citizens through tax evasion, as well as growing international pressure from the Paris-based Organisation for Economic Cooperation and Development and G-20 financial regulations forced the Swiss government to considerably relax confidentiality provisions for numbered accounts.

Non Submission of Income Tax Returns by 300 Political Parties

       A country-wide probe conducted by the Income Tax (I-T) department has found that close to 300 registered political parties have never filed their tax returns and the Election Commission has now asked the department to issue notices to them.

        The probe, conducted after the EC asked the Central Board of Direct Taxes (CBDT) to ascertain the financial status of these small parties for alleged violation of tax laws and money laundering, has been submitted to the election panel.

         A number of parties also do not possess permanent account number (PAN), the bulky report, prepared by the assessment wing of the CBDT, said.

        The EC had sent a list of suspect political parties to CBDT for probe early this year. It was alleged that people are floating such political parties in large numbers to evade taxes as donations to them are exempt from payment of income tax.

       The EC has asked the department to intensify the probe and serve show-cause notices to these small parties under relevant sections of I-T Act and ascertain the source and end use of the funds they received.

       The report has tracked the I-T returns of these small parties in 13 states including Tamil Nadu, West Bengal and those from the North East.

        "The status of such small parties in the remaining states will also be sent to the EC soon," a senior officer involved in the exercise said.

Data Protection from Hackers

Washington, June 12 (ANI): Computer hackers have an ability to cause chaos by using personal data that they have stolen. But the theft can be prevented if people are careful with their information.

Personal finance expert Carmen Wong Ulrich shared advice during a talk on 'The Early Show on Saturday Morning' on how to protect personal information and what to do when hackers get their hands on it.

"The first line of defense is always your passwords, and the information on your computer," CBS News quoted Ulrich as telling co-anchor Betty Nguyen.

"Make sure you go right to your computer, change your log-in information and password information on everything from your credit card accounts to where you shop through retailers and your email, as well because, as we saw-Google and Yahoo - the hackers are coming in from everywhere," she said.

Ulrich, author of 'The Real Cost of Living', said almost three-quarters of us use the same password on several accounts.

"Please stop doing that! Protect the banking part as much as you can, because the hackers will come in from the company side. But they're coming in on your side, too," she implored.

"Also, use one computer, if you can, to do your banking. I know it's hard (with everyone using so many different devices). Try to do it all on one computer. That limits exposure.

"And, never, ever do banking or do transactions online on an open Wi-Fi. It's very tempting because it's so easy. You could be sitting in a coffee shop or the airport or wherever you are. Squatters will sit there and scour that Wi-Fi. So definitely don't do that.

"And don't use your debit card online. This runs counter (to conventional wisdom), because credit cards, people say, are bad. But a credit card protects you and your cash.

"Of course, there's (a) liability (limit) with your debit card. But who wants their accounts emptied of cash? Instead, use your credit card online, so at least you don't expose yourself, cash-wise," she stated. (ANI)

Prime Minister Justification regarding Ram Dev

New Delhi: In his first comments on the police action at Ramdev's protest congregation, Prime Minister Manmohan Singh on Monday termed it as "unfortunate" but justified it saying there was "no alternative". 

He asserted that his government was "concerned" and "serious" about fighting corruption but maintained that there was "no magic wand" to do so.

"It is unfortunate that operation had to be conducted but quite honestly, there was no alternative," Singh told reporters here when asked to comment on the much-criticised midnight police action to disrupt Ramdev's anti-corruption protest at Ramlila Maidan. 

On the issue of corruption being flagged by civil society activists and parties, the Prime Minister said, "the government is serious and we are concerned about corruption and blackmoney. There is no doubt. But there is no magic wand." 

With regard to demands that the Prime Minister should be brought under the purview of Lokpal, Singh refused to comment saying the issue was before the joint drafting committee comprising ministers and members from civil society. 

Singh, who was talking to reporters on the sidelines of function organised by Hindi daily 'Rajasthan Patrika', was asked about his assessment of his two years in office. "It is for you people to judge," he said.

PTI 

Rs. 5 per litre Petrol Price Hiked

New Delhi, May 14 (IANS) In its steepest hike so far, the price of petrol will be raised Rs.5 per litre in an over 8 percent increase from Saturday midnight. The increase comes only a day after the assembly poll results in five states, and was greeted by anger and derision from ordinary citizens and opposition parties.

According to officials, the three state-run companies will increase the price in a move to plug the losses suffered due to sale of subsidised domestic fuel.

In Delhi, petrol is currently priced at Rs.58.37 per litre, while it is Rs.63.08 per litre in Mumbai till Saturday. From midnight, it will be raised to Rs.63.37 and Rs.68.33, respectively.

In June last year, the government had allowed oil companies to set the price of petrol as per the market situation, following which they had raised the price of petrol by Rs.3 per litre.

Then, another substantial price rise took place in December 2010, when companies had hiked the price by Rs.3 per litre.

The last price hike was in January, when oil companies had raised the price by four to two percent. Thus, in the last nine months, the price of petrol has increased from Rs.47.93 per litre to Rs.63.37 - through nine revisions.

Despite the hike, oil company officials said they will still be losing about Rs.5 per litre of petrol, due to rising international crude prices, with India meeting eighty percent of its fuel consumption through imports. Another hike may be done next week, said officials.

There has been steady increase in the international prices, with the Indian crude basket priced at $113.09 per barrel Friday. The average of the previous fortnight from April 16-30 stood at $119.4 per barrel.

The last time the monthly average was above $100 level was in August 2008, when the crude basket price was calculated at $113.05 per barrel.

The biggest loss of the companies, however, is due to the sale of diesel, cooking gas and kerosene, whose price continues to be controlled by the government. Every day, oil companies lose Rs.495 crore due to the sale of these three products alone.

The empowered Group of Ministers (eGoM) on fuel prices is scheduled to meet next week, to consider a proposal to raise prices.

According to sources, there are proposals to increase the price of diesel by about Rs.4 per litre. Similarly, cooking gas cylinder could become costlier by about Rs.20.

The Bharatiya Janata Party (BJP) and the Left parties condemned the hike in petrol prices Saturday, terming it as an 'attack' and a 'cruel hoax' on the common man.

The BJP said it would fight against the measure 'inside and outside parliament' while the Left called it hypocrisy, coming a day after the election results to five states.

'The petrol price hike exposed the failure of the economist Prime Minister Manmohan Singh,' BJP spokesman Ravi Shankar Prasad told reporters here.

Communist Party of India-Marxist (CPI-M) leader Sitaram Yechury said the price hike was highly condemnable.

'This is a cruel hoax on the common people,' he told reporters here.

Forward Bloc national secretary G. Devarajan said the government was 'indulging in hypocrisy by increasing the prices of petrol just one day after the assembly poll results'.

The moment the news flashed across the media, petrol stations in the city saw long queues of vehicles with people in a hurry to fill up the tanks before the hiked prices came into effect.

Shweta Arya, consultant in an infrastructure firm, lamented that her transportation budget has spiked in the last one year.

'My petrol expenditure has doubled in the last one year. How will the common man survive after such a price hike,' she wondered.

Vinay Verma, 32, wondered if the government could tolerate corruption among politicians and bureaucrats, which has drained the country's coffers, then why couldn't it also take on the burden of subsidy.

'I know that the hike is because of the international increase in prices. But what angers me is that the government can tolerate scams worth thousands of crores of rupees but fails when it comes to international fuel rates,' lamented Verma, a human resources executive.

New Name of Orissa

New Delhi, March 24 (PTI) Orissa will hereafter be called ''Odisha'' and the Oriya language will be known as ''Odia'' with Parliament giving approval to amendment of the Constitution and also passing the related bill.

The Rajya Sabha passed the Orissa (the Alteration of Name) Bill and adopted the Constitution (113th) Amendment Bill after a brief debate with members from all parties hailing the move as "historic" for people of the state.

Supported by all parties, including the Biju Janta Dal, the Constitution Amendment Bill was adopted by all 169 members present and voting.

Such a bill requires support of at least two-third of members present and voting. Besides, the majority of the strength of the House should be present for voting. The Upper House has a strength of 245 members.

Lok Sabha has already adopted these measures after the Centre received the resolution passed by the state Assembly.

While there was all round support for the measure, BJP and Congress members sought to target Chief Minister Naveen Patnaik charging him with non-performance and heading a government facing scams.

The bills were piloted by Home Minister P Chidambaram. However, the electronic voting system witnessed glitches during the division so much so that even Prime Minister Manmohan Singh''s vote was also cast wrongly.

Participating in the debate, members said the name change was the process of decolonisation as Britishers had changed the Indian names of cities and states.

Pyarimohan Mohapatra (BJD) said it was a "great moment" for people of the state and added that with the change of name, they are getting back their pride.

R C Khuntia (Cong) rued that the state, which was prosperous once, has become poverty-stricken. He, however, hoped the change of name will fulfil aspirations of people.

He said the state was facing many scams and corruption charges in the present rule.

Rudra Narayan Pany (BJP) charged the Orissa Chief Minister with non-performance and said Patnaik could not speak even the local language. His colleague Chandan Mitra said, "Orissa regains its prestige and sense of history."

Mitra said while India''s heritage was revered in many parts of the world, "we have forgotten our own heritage."

There have been many cities and states that have been renamed after independence. These includeThiruvananthapuram (Trivandrum), Mumbai (Bombay), Chennai (Madras), Kolkata (Calcutta), Pune (Poona), Kochi (Cochin) and Bangaluru (Banglore).

Mobile Numbers Portability

Friends 

                Now, implementation of portability of Mobile Numbers has been extended upto 31-October-2010. Mainly all networks technically upgraded and ready to convert their numbers to each others. For example if you using a mobile with airtel connection and want to change due to change in services in BSNL, there will be no need to change mobile number. Your mobile number will not be changed with BSNL services. It will be beneficial for Mobile users. The below information has been given by the Minister of State for Communications and Information technology, Shri Sachin Pilot in written reply to a question in Rajya Sabha today. 

             All the networks in the country have been technically upgraded for implementations of Mobile Number Portability (MNP) Service and the network of Mahanagar Telephone Nigam Limited (MTNL) is in the process of upgradation. However, the readiness of networks can be ascertained after comprehensive testing of networks which is being conducted across all the networks. Government is regularly monitoring the status of implementation of MNP including readiness of the networks. All the networks of the Access Service Providers in all the service areas and International Long Distance Operators (ILDOs) in the country have to be ready and tested for satisfactory performance in post MNP implementation scenario before the MNP Service is commercially launched. In case, any of the networks is not ready and MNP service is launched, it will not be possible to make calls from that network to ported numbers of other network.

               The Government had set the time line for implementation of Mobile Number Portability (MNP) Service as 31st March 2010 in the month of December, 2009 which was further extended to 30th June 2010. The whole network {all Access Service Providers in all service areas and International Long Distance Operators (ILDOs)} in the country have to be ready and tested before the MNP Service is implemented. Keeping the complexity and enormity to the testing involved before MNP is implemented and keeping in view of the status of implementation by various operators in the month of June, 2010, Government has extended the time line for implementation of MNP to 31st October, 2010. 

Master Circular on "Credit Card" Operations

Friends

                     Reserve Bank of India has issued a Master Circular on Credit Card operations w.e.f. 1st July, 2010. This circular covers various issues regarding operations of Credit Cards like as adoption of Fair Practice Code, Interest rates and other charges on protection of customers against wrongful blling, liabilities and responsibilities of bank etc.  Complete circular in detail is given as under :-

In order to ensure that Banks/ Non-Banking Financial Companies (NBFCs) run their credit card operations in a fair and regulated manner, Reserve Bank of India (RBI) had issued Master Circular on Credit Card operations on 1^st July, 2010. These guidelines cover various issues concerning credit card operations like adoption of Fair Practice Code, interest rates and other charges on protection of customers against wrongful billing, liabilities and responsibilities of the banks etc..

In terms of RBI circular dated 9^th July, 2010, banks have been advised to strictly adhere to the guidelines contained in the Master Circular on credit card operations both in letter and sprit, failing which RBI shall be constrained to initiate suitable penal action, including levy of monetary penalties, under the relevant statutory provisions.

Service charges are decided by individual banks on their own, havingregard to cost of rendering various services and as such there is no uniformity in the service charges for credit cards and issuance of demand drafts by different banks. Since the RBI has not fixed rates to be charged on their services and banks are free to determine interest rates and service charges, there is no violation of RBI guidelines/ directives by banks. Under the Banking Ombudsman Scheme, 2006 as amended in February, 2009, Banking Ombudsman can award compensation upto Rs. 1.00 lakh in case of complaints arising out of credit card operations by banks, taking into account the loss of time, expenses incurred, harassment and mental anguish suffered by the complainant.

This information was given by the Minister of State for Finance, ShriNamo Narain Meena in a written reply to an Unstarred Question raised inRajya Sabha today.

New Pay Scales for Regional Rural Banks

Friends

            Revision of Pay Sales of RRB's is announced equal to Naionalised Banks as per 9th Bipartie Settlement by Sh. Pranab Mukherjee and asked the Regional Rural Bank's to increase their branch with Core Banking Solutions. 

                            Finance Minister Shri Pranab Mukherjee has asked the Regional Rural Banks (RRBs) to bring their Non-Performing Assets (NPAs) below 5% by this year itself. Finance Minister also announced the wage revision of the pay-scale and allowances of the employees of the RRBs corresponding to those of NationalisedBanks as per 9^th Bipartite Settlement. The additional cost burden of the arrears on this account would be about Rs. 791 crores. He was addressing the annual review meeting of Chairmen of RRBsand General Managers of Sponsor Banks, here today. ShriMukherjee asked the RRBs to speed up their activities to expand their branches on platform of Core Banking Solutions. The Finance Minister emphasized upon use of new technology including Business Correspondents, mobile banking vans, tele-banking etc. to provide banking services to entire population of the country, especially in the rural areas.

Secretary Financial Services, Shri R. Gopalan, Deputy Governor RBI, Dr. K.C. Chakravarty, Chairman NABARD, Shri U.C.Sarangi and Additional Secretary, Financial Services, Shri Rakesh Singh were also present on this occasion among others.

Following is full text of the speech delivered by the Finance Minister Shri Pranab Mukherjee on this occasion:

“I am happy to be here in the annual review meeting of Chairmen ofRRBs and General Managers of Sponsor Banks. Such meetings are being organized regularly since January 2007 and have helped in preparing a realistic action plan for strengthening the RRBs on a sustainable growth trajectory.  I hope that this meeting will help us in further consolidating the efforts being made by the RRBs, Sponsor Banks, Govt Of India,NABARD  and the Reserve Bank of India.

As you are aware, the first batch of RRBs were established on 2 October 1975 and their number gradually increased to 196 in 1986.  TheRRBs were designed as unique financial institutions with exclusive focus on development of rural areas.  It was expected that these institutions would provide efficient financial services at affordable cost to the disadvantaged sections of the rural population. 

Government of India had initiated a series of measures in the recent years to strengthen the RRBs to emerge as strong financial institutions for meeting the financial needs of the rural population.  In the wake of the announcement in the Union Budget 2007-08, 27 RRBs which had negative networth as on 31 March 2007 have been recapitalized.  Aconducive policy environment has been created for expanding the branch network of RRBs.  The branch licencing norms have been made flexible. RRBs have responded to these measures and have opened 716 branches during the last 02 years.

For further improving the financial health of RRBs, the Government of India started the process of structural consolidation of RRBs by amalgamating RRBs sponsored by the same Sponsor Banks within the State.  The process of amalgamation is almost complete.  As on date, there are 82 RRBs (46 amalgamated and 36 stand alone) with a branch network of 15,475 branches covering 619 districts, 26 States and 01 Union Territory (Puducherry).

RRBs are expected to play a vital role in promoting financial inclusion in the country.  To achieve this objective, RRBs are being supported out of the Financial Inclusion Fund and Financial Inclusion Technology Fund set up in NABARD.  NABARD had launched a pilot project for facilitating Financial Inclusion with ICT in 15 RRBs.  The pilot project is expected to cover 150 villages in 30 districts of 14 States.  AllRRBs need to draw up individual plans for financial inclusion in their areas of operation at the earliest and also adopt the BC / BF model.

I am happy to note that RRBs have shown improved performance in many areas.  The total loan outstanding of RRBs as on 31 March 2010was Rs.83,562 crore whereas the deposits amounted to Rs.1,42,814crore.  The ground level credit flow of RRBs has improved from Rs.43,367crore to Rs.56,268 crore thereby recording an appreciable growth rate of about 30%.  A significant part of their performance is substantial lending to the priority sector.  RRBs are mandated to lend 60% of their loans to the priority sector.  During the last three years, RRBs have not only achieved the target fixed for the purpose but have maintained priority sector loans above 80%.  I am also happy to note that RRBs have maintained their focus on agriculture as over 61% of the priority sector loans are for agriculture sector.  The RRBs have also improved the health of their credit portfolio as the net NPA has now reduced to 1.62%.  Only three RRBs are now making losses.

There is no doubt that the enabling environment created by Government of India, RBI and NABARD has helped the RRBs in improving their performance.  Still, there are many areas of concern.  30 RRBs had accumulated losses to the tune of Rs.1,808 crore.  All weak RRBs need to chalk out a time bound action plan to wipe out the accumulated losses and simultaneously achieve all the prudential norms.

In the last review meeting held in August 2009, I had expressed concern that a very large number of RRBs continued to have low CRAR.  It was also observed during the review that some of the RRBs presently having reasonable CRAR would also be not able to maintain it on account of certain expenditure they might have to incur in the coming years for payment of enhanced wages and installation of CBS.  To address this situation, a Committee was set up under the Chairmanship of Dr. K CChakravarty, Deputy Governor, RBI to analyse the financials of RRBs and suggest measures so that each RRB has atleast 9% CRAR by 2012.  The Committee has already submitted their report. The report is now under examination in consultation with NABARD and RBI.  I am sure the implementation of the feasible recommendations of the Committee would help the  RRBs to emerge as stronger financial institutions.

It is imperative that all RRBs embrace the latest technology for providing services to their customers.  I have been constantly laying emphasis that all RRBs in a time bound matter should have all their branches under Core Banking Solution.  I understand that 21 RRBs have now covered their entire bank branch network under CBS.  10 moreRRBs are on the way to achieve full coverage of their branches under CBS.  However, it is a matter of concern that CBS is yet to take roots in 51RRBs.  I would urge upon all the RRBs and their sponsor banks to attach utmost priority to CBS and in today’s meeting a time bound programmeshould be fixed for CBS implementation for each of the RRBs.

The sponsor banks also need to closely monitor the performance of their sponsored RRBs and provide timely guidance to them wherever necessary.  It has been brought to my notice that some of the sponsor banks have withdrawn the Chairmen of RRBs before the completion of their tenure.  Though the premature withdrawal must be for valid reasons, this could affect the performance of the RRBs in an adverse way, besides impacting the morale of the staff of RRBs.  I suggest that the sponsor banks take all precautions at the time of selection of Officers for the post of Chairman of RRB so as to ensure that they continue to guide the RRBs  for a period of at least three years. 

I understand that of the 46 amalgamated RRBs, 39 are now scheduled by Reserve Bank of India.  In case of 7 other RRBs, NABARD is required to undertake their inspection with reference to their annual accounts as on 31 March 2010.  I would impress that this process of scheduling the remaining banks should be completed at the earliest.

I have noted that RRBs (officers and employees) Service Regulations 2010 have since been issued by GOI and the process has been initiated by the RRBs for adoption of these regulations.  The new Appointment and Promotion (officers and employees) Rules have already been issued on 13.7.2010 for publication in the Gazette of India. These measures should help in improving productivity and business of the RRBs.

Keeping in view the expectations from the RRBs, the training and capacity building of RRB Officers and Staff need to be given utmost priority.  A Committee set up for the purpose has identified a number of areas for capacity building of RRBs.  All the RRBs should prepare a comprehensive plan for meeting the training needs of its staff members. A mechanism should be created for  providing funding support to RRBsfor conducting these training programme duly involving NABARD, sponsor banks and the RRB itself.

In the light of the ninth bipartite settlement between the Indian Banks Association representing the managements of the Public Sector Banks and the United Forum of Bank Union representing the associations/unions of all PSBs, the wage revision of the pay and allowances of the RRBs has also been taken up. The additional cost burden of the arrears is likely to be Rs 791 crores , which will bring down the total profits of the RRBs from Rs 2374 crores , as on 31^st March, 2010to Rs 1615 crores , adjusting for the additional cost burden of arrears on the RRBs. This is likely to lead to more RRBs going into losses against only three loss making RRBs at present. Yet the Government is committed towards fulfilling its obligation of giving equal pay scalescorresponding  to those of nationalized banks to the RRB employees.  I am happy to announce that we are fulfilling the Government commitment of giving  equal pay scales corresponding  to those of nationalized banks to the RRB employees, as per Ninth Bipartite Settlement.

I look forward to our deliberations today and am sure that the gathering will have fruitful discussions and come out with pragmatic and innovative suggestions for further improving the performance of RRBs.”

DSM/BY-237/10