RRB’s planning to make an initial public offering to raise capital must have at least Rs 300 crore of net worth for the previous three years, according to the draft guidelines, issued on Wednesday. They should also have their capital adequacy above the regulatory minimum level of 9%.
The Ministry of Finance also asked sponsor banks to identify RRBs eligible for fundraising.
At present, there are 43 RRBs sponsored by a dozen commercial banks. The Regional Rural Bank Amendment Act, 2015 enabled these banks to access the capital market outside their current shareholders — the central government, sponsor banks and the respective state governments — which hold shares in each RRB in the ratio of 50:35:15.
No RRB has accessed the capital market so far.
“Listing of the RRBs will provide liquidity, marketability and visibility along with the ability to raise capital in the future,” the ministry said in its communication to the heads of RRBs and their sponsor banks on Wednesday.
No bank with accumulated losses should go for an IPO, the government suggested. These banks should have a minimum Rs 15 crore operating profit for at least three of the five years immediately prior to the share sale, with a 10% return on equity and 0.5% return on assets, according to the draft.
It said these banks should prepare a three-year capital roadmap as part of the capital raising plan.
It suggested that prior to raising capital through an IPO, RRBs should consider an issue of bonus shares and rights shares to their existing shareholders. The issue of bonus shares would reward the existing shareholders who so far have not received any dividend while having the first claim on the existing reserves. It would also bring down the price of the scrip, specifically for the RRBs that are carrying disproportionate reserves against equity.
The RRBs will be allowed to raise capital by placing shares with large banks, state-owned insurance companies including
, private insurers, pension funds and mutual funds through book building, the draft guidelines said.
As an additional option to raise regulatory capital, the Reserve Bank of India has already allowed RRBs to issue perpetual debt instruments and has made such instruments eligible for inclusion as additional tier-1 capital, subject to certain limits.
