Mumbai, Nov. 5: With private sector banks, such as ICICI Bank, aggressively penetrating the villages, regional rural banks are set for a makeover in the coming months. Moves are on to allow sponsor banks a controlling stake, greater autonomy to management and banks to offer a wide array of products.

Sponsor banks (PSU banks) now have 35 per cent stake in a RRBs, with the rest spread between the Centre which has a 50 per cent stake and the state government for the RRB which has a 35 per cent stake.

Sources said the banks were facing a funds crunch to meet their burgeoning business needs. “We have many RRBs where authorised capital is Rs 5 crore, but their scale of business and the branch network is much large. These banks are now finding that capital is inadequate,” said a source.

Since the Centre was unlikely to pump in capital at the cost of exchequer, there was a possibility of sponsor banks getting a majority stake by acquiring shares from the Centre, the source added.

Flush with funds, the PSU banks were not averse to a majority control in RRBs as not only are these banks doing very well but also they provide a platform to sell various products of the PSU banks such as insurance, the source said.

In addition, major modifications are likely in the areas of autonomy to boards and better remuneration structure for the employees. The Reserve Bank of India (RBI) has set up a task force under Dr K G Karmakar, managing director, National Bank for Agriculture and Rural Development (Nabard), and nine other members to recommend the areas of autonomy for the boards.

The terms of reference for the panel, whose recommendations are expected shortly, include human resources management and development and business environment and strategies.

The panel will also make recommendations on empowering the boards for operational efficiency, particularly in evolving and implementing appropriate policies for assessment of manpower requirement and recruitment, and promotion of staff, including performance related incentives.

The panel will also draw up strategies to face business challenges in rural areas, including a complete range of financial services for the rural clientele.