Finance Minister Nirmala Sitharaman will on Monday review the performance of Regional Rural Banks (RRBs) for financial year 2023-24. This is Sitharaman’s first review meeting of such banks after assuming charge as Finance and Corporate Affairs Minister in the Modi 3.0 government. It will also be the first after presentation of the first full fledged Budget on July 23.
This comes at a time when there has been substantial improvement in the financial performance of RRBs in the last three years (2021-22, 2022-23 and 2023-24).
The government has in the recent years emphasised on technology upgradation of RRBs, strategies for NPA reduction, IT initiatives, improving financial inclusion, enhancing credit delivery to rural areas and support being given by sponsor banks to the RRBs.
Although speculation is rife that the issue of RRB consolidation may return to government’s agenda, it is quite unlikely that it would be taken up by Sitharaman on Monday’s meeting, sources said.
This review meeting, which will be held in the capital, will be in addition to her scheduled review of performance of Public Sector Banks (PSBs) slated for Monday, informed sources said.
Merging RRBs
It maybe recalled that bank employee associations had earlier told the Finance Minister to merge RRBs with their respective sponsor banks to ensure overall efficiency and viability of the banking sector.
Merging RRBs with sponsor banks will ensure delivery of a uniform product range to the entire clientele. It will accelerate growth of the rural economy and priority sector lending, which are crucial for the government’s plan for robust economic growth, the bank employee associations had submitted.
As of March 31, 2023, there were 43 RRBs sponsored by 12 scheduled commercial banks, with 21,995 branches and operations. Also there were 305.3 million deposit accounts and 29 million loan accounts in 26 States and three Union Territories (Puducherry, Jammu & Kashmir, and Ladakh).
The total business of RRBs crossed the milestone of ₹10 lakh crore during FY23, growing at 10.1 per cent on year-on-year basis. Gross NPAs of RRBs at 7.28 percent as of March 31, 2023 was the lowest in last seven years. Net NPA stood at about 3.2 percent.
Monday’s meeting will most likely be attended by both the new DFS Secretary Nagaraju Maddirala and outgoing Secretary Vivek Joshi, sources added.
In previous review meetings last year, Sitharaman had asked banks to map RRBs with the MSME clusters and also put greater thrust on increasing network of rural branches in cluster areas identified by the MSME ministry. Sitharaman had also emphasised on digital capability upgradation of RRBs.
RRBs were formed under the RRB Act, 1976 to provide credit and other facilities to small farmers, agricultural labourers and artisans in rural areas. Currently, the Centre holds 50 per cent stake in RRBs, while 35 per cent and 15 per cent are with the concerned sponsor banks and State governments, respectively.
