Finance Ministry asks three RRBs to give IPO blueprint by March-end

The DFS on Tuesday convened a meeting to review the IPO plans of three regional rural banks-Haryana Gramin Bank, Kerala Gramin Bank and Tamil Nadu Grama Bank

The Ministry of Finance has asked three regional rural banks (RRBs) to submit their draft initial public offering (IPO) plans to their respective sponsor banks as well as the Department of Financial Services (DFS) by the end of March, according to a 

senior government official who spoke on the condition of anonymity. 

The DFS on Tuesday convened a meeting to review the IPO plans of three RRBs — Haryana Gramin Bank, Kerala Gramin Bank, and Tamil Nadu Grama Bank. Senior officials of the RRBs as well as the sponsor banks also attended the meeting. 

“The capital planning committee and the sub-committee on IPO will outline the proposed assessment methodology for raising fresh capital,” said the official. 

“A checklist of statutory compliances required from regulators, such as Securities and Exchange Board of India and Reserve Bank of India, will be prepared, along with a draft proposal, which will be submitted for vetting by end of this financial year,” the official added.

 

The official added that the government has plans to list at least five RRBs in the next two financial years, of which three may be listed in FY27.

 

In May, after the consolidation exercise under the One State, One RRB initiative, which reduced the number of RRBs from 48 to 23, the ministry had asked sponsor banks to submit a list of candidates eligible for an IPO.

 

Under the existing shareholding framework, the Centre holds a 50 per cent stake in RRBs, while the respective state governments and sponsor banks own 15 per cent and 35 per cent, respectively.

 

In FY25, Haryana Gramin Bank, sponsored by Punjab National Bank (PNB), reported a net profit of ₹376.6 crore and a capital to risk-weighted assets ratio (CRAR) of 15.31 per cent.

 

The gross non-performing asset (GNPA) ratio of the RRB declined to 1.95 per cent of total advances, while net NPA was maintained at zero.

 

Similarly, Tamil Nadu Grama Bank, sponsored by Indian Bank, reported a net profit of ₹367.39 crore in FY25 and a CRAR of 13.70 per cent. Its GNPA stood at 0.79 per cent, and net NPA was zero.

 

Kerala Gramin Bank, sponsored by Canara Bank, reported a net profit of ₹312.89 crore in FY25, with a CRAR of 13.93 per cent. However, its GNPA stood at 1.82 per cent in FY25, while net NPA was maintained at zero.

 

According to the draft eligibility guidelines for listing RRBs issued in 2022, eligible lenders must have a minimum net worth of around ₹300 crore and maintain a capital adequacy ratio above the regulatory minimum of 9 per cent in each of the preceding three years. They must also have reported an operating profit of about ₹15 crore in at least three of the previous five years and delivered a return on equity of 10 per cent in three out of five years. In addition, such banks should not be under the Reserve Bank of India’s prompt corrective action framework.

 

RRBs were established in 1975 under the provisions of an ordinance promulgated on September 26, 1975, and the Regional Rural Banks Act, 1976. The RRBs reported a combined profit of ₹6,825 crore in FY25, lower than the ₹7,571 crore recorded in FY24.

 

On December 1, Minister of State for Finance Pankaj Chaudhary told the Lok Sabha that the moderation in profits was primarily on account of the rollout of a pension scheme with retrospective effect from November 1, 1993, along with expenditure related to computer increment liabilities.