On Thursday, Nirmala Sitharaman, the Finance Minister, requested the Reserve Bank of India’s (RBI) assistance in settling Regional Rural Banks’ (RRBs’) outstanding debts to state governments.
Sitharaman instructed RRBs to use their strong Current Account Savings Account (Casa) ratio to extend more credit during a review meeting on the performance of nine RRBs from Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh, and Rajasthan that was conducted in Udaipur.
A number of high-ranking officials from these five states, including M. Nagaraju, secretary of the Department of Financial Services (DFS), additional secretary, CEOs of sponsor banks, chairpersons of RRBs, senior officers from the RBI, Small Industries Development Bank of India (SIDBI), and National Bank for Agriculture and Rural Development (Nabard), attended the meeting.
In order to further enhance performance, the FM also instructed RRBs to exploit their local contacts and become more customer-friendly. In order to ensure that RRBs have access to the resources they require for success, sponsor banks share best practices, offer technical help, and play a vital role in these efforts.
In order to guarantee credit for small and micro firms, she underlined the significance of active outreach by RRB branches situated in Micro, Small, and Medium firms (MSME) clusters. According to a news release from the finance ministry, even though all RRBs have created tailored MSME products that are in line with cluster operations, they still need to periodically assess their loan portfolios in this market.
The finance minister emphasised that sponsor banks and RRBs need to be aware of the difficulties that lie ahead, especially when it comes to upholding strong corporate governance, growing digital services, and preserving asset quality.
The RRBs’ Consolidated Capital to Risk (Weighted) Assets Ratio (CRAR) grew from 7.8% in FY2021 to 13.7% in FY2024. Additionally, the profitability of the organisation improved from losses of Rs 41 crore in FY2021 to net profit of Rs 2,018 crore in FY2024, and the ratio of Gross Non-Performing Assets (GNPA) is comparatively lower at 3.9%.
Sitharaman asked RRBs to raise awareness and offer credit under the PM Surya Ghar Muft Bijli Yojana initiative, pointing out the scheme’s potential in Gujarat and Rajasthan during the meeting.It was also mentioned that the One District One Product (ODOP) scheme has the potential to boost RRBs’ credit penetration. In a similar vein, RRBs were instructed to locate possible trades within their operational regions for credit under the PM Vishwakarma scheme. According to a press release from the finance ministry, RRBs were also instructed to fulfil the objectives of Priority Sector Lending and contribute more to the ground-level farm credit disbursement.
In order to improve the performance of the MUDRA scheme and other financial inclusion schemes in the Bundelkhand region and aspirational districts, Sitharaman directed the State Level Bankers’ Committee (SLBC) to hold specific meetings with state government officials, sponsor banks, and RRBs. Sitharaman took note of the lower uptake of the MUDRA scheme in the Bundelkhand region.