FM Nirmala Sitharaman to review RRBs' performance after Budget session

Union Finance Minister Nirmala Sitharaman will review the performance of regional rural banks (RRBs) after the Budget session of Parliament, according to two people familiar with the matter.

“The finance minister will review the performance of RRBs after August 13. The review will include discussions on enhancing the digital capabilities of RRBs,” said a senior government official.

The RRBs were established in 1975 under the provisions of the Ordinance promulgated on September 26, 1975, and the Regional Rural Banks Act, 1976.

An email query sent to the finance ministry did not elicit any response until the time of going to press.

Earlier, bank employee associations had told the finance minister to merge RRBs with their respective sponsor banks to ensure overall efficiency and viability of the banking sector. 

“Competition among public sector banks (PSBs) and RRBs is leading to the wastage of scarce financial resources by offering the same types of services. Despite this, a large chunk of our rural population is being denied the benefits of technology-driven and up-to-date banking products. 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,” said a joint statement addressed to Sitharaman by the All India Bank Officers’ Confederation and the All India Bank Employees Association. The duo represents more than 600,000 bank employees.

As of March 31, 2023, there were 43 RRBs sponsored by 12 scheduled commercial banks, with 21,995 branches and operations. 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 states of Goa and Sikkim do not have RRBs.

All PSBs, except Punjab & Sind Bank, sponsor one or more RRBs. J&K Bank is the only private sector bank to sponsor an RRB. About 92 per cent of the RRB branches are in rural/semi-urban areas.

The total business of RRBs crossed the milestone of Rs 10 trillion during FY23, growing at 10.1 per cent year-on-year (Y-o-Y).

The asset quality position of RRBs during FY23 showed an improvement, with gross non-performing assets (gross NPAs) reducing to 7.28 per cent as of March 31, 2023, the lowest in seven years.

Thirty four of the 43 RRBs reported a reduction in absolute gross NPA (amount), and 37 of them reported a reduction in the percentage of gross NPAs.

Net NPA and provisioning coverage ratio (PCR) also improved during FY23, standing at 3.2 per cent and 59.2 per cent, respectively, as of March 31, 2023.