Union Finance Minister Nirmala Sitharaman on Thursday urged the Reserve Bank of India (RBI) to intervene in resolving the pending dues of Regional Rural Banks (RRBs) from state governments, in addition to the efforts being made by the government and sponsor banks.
During a review meeting on the performance of nine RRBs from the states of Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh, and Rajasthan, held in Udaipur, the finance minister directed RRBs to leverage their healthy Current Account Savings Account (CASA) ratio to provide more credit.
The meeting was attended by M Nagaraju, Secretary of the Department of Financial Services (DFS), additional secretary, other senior DFS officials, chairpersons of RRBs, CEOs of sponsor banks, representatives from the RBI, Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (NABARD), and senior officers from the five states.
The finance minister also directed RRBs to become more customer-friendly and use their local connections to further improve performance. Sponsor banks play a significant role in these efforts by providing technical assistance, sharing best practices, and ensuring that RRBs have access to the resources they need to succeed.
Sitharaman emphasised the importance of active outreach by RRB branches located in Micro, Small, and Medium Enterprises (MSME) clusters to ensure credit for small and micro enterprises. Although all RRBs have devised customised MSME products aligned with cluster activities, they need to regularly review their credit portfolios in this segment, according to the finance ministry’s press statement.
The finance minister also highlighted that sponsor banks and RRBs must recognise the challenges ahead, particularly in maintaining asset quality, expanding digital services, and ensuring robust corporate governance.
The consolidated Capital to Risk (Weighted) Assets Ratio (CRAR) of RRBs has increased from 7.8 per cent in FY21 to 13.7 per cent in FY24, and profitability has improved from losses of Rs 41 crore in FY21 to a net profit of Rs 2,018 crore in FY24. Gross Non-Performing Assets (GNPA) are relatively lower, with a ratio of 3.9 per cent.
During the same meeting, the finance minister noted the potential of the PM Surya Ghar Muft Bijli Yojana scheme in the states of Gujarat and Rajasthan and urged RRBs to generate awareness and provide credit under the scheme.
“The potential of the One District One Product (ODOP) programme was also highlighted to increase credit penetration by RRBs. Similarly, RRBs were directed to identify potential trades under the PM Vishwakarma scheme in their areas of operation to provide credit. RRBs were also directed to increase their share in ground-level agriculture credit disbursement and achieve the stated objectives of Priority Sector Lending,” the finance ministry’s press statement added.
However, Sitharaman noted the lower offtake of the MUDRA scheme in the Bundelkhand region and directed the State Level Bankers’ Committee (SLBC) to hold specific meetings with state government officials, sponsor banks, and RRBs to improve the performance of the MUDRA scheme and other financial inclusion schemes in the Bundelkhand region and aspirational districts.
Earlier this week, the finance minister met top officials of RRBs in New Delhi, where banks were asked to expedite the one state-one RRB initiative.
First Published: Aug 22 2024 | 7:46 PM IST
