The central govt’s contribution will be channeled through Nabard. There will be no interest charged on the central govt’s money. Nabard’s contribution will go to the states as loans.
The cabinet took this decision Tuesday. The law minister Ravishankar Prasad said the banks span four states and are on the verge of closure. The beleaguered banks count 16 in Uttar Pradesh, 3 in Jammu and Kashmir, 3 in Maharashtra and 1 in West Bengal. These banks have deposits of Rs. 6,839 crore and they have given loans of Rs. 3,774 crore.
Sources say there are some conditions attached to this assistance. The banks will have to reduce their NPA by half, will have to show an increase of 15 percent in their deposits, will have to begin a monthly monitoring plan , will have to appoint qualified CEOs and will have to abide by the corporate governance rules, sources add.
As of now the banks have no licence and they may seek permission from the RBI to work in rural areas after they have become operational.