Sponsor banks need to proactively handhold RRBs for tech adoption: DFS

The Finance Ministry on Friday said sponsor banks, in partnership with the National Bank for Agriculture and Rural Development (Nabard), need to handhold their respective regional rural banks (RRBs) for facilitating technology adoption, to enable them to serve their customers more efficiently. 

Department of Financial Services (DFS) Secretary Vivek Joshi discussed viability plans of RRBs, as some of these are loss-making, during a financial review meeting in Pune, which was attended by senior officials of DFS, the Reserve Bank of India, Nabard chairman, senior officials of sponsor banks, and chairpersons of RRBs.

“During the meeting, it was noted that there has been substantial improvement in the financial performance of RRBs in FY23, as compared to FY22. Joshi also urged RRBs to redouble their efforts for achieving the targets fixed in the viability plans within the next one year itself,” the finance ministry said in a statement.

“The need for technology upgrade for RRBs, strategies for NPA reduction, IT initiatives, improving financial inclusion, enhancing credit delivery to rural areas and support being given by sponsor banks to RRBs were the other issues discussed in the meeting,” it added.

The viability plans of these RRBs include credit expansion, business diversification, improvement in corporate governance, among others. In FY22 and FY23, the Centre had decided to infuse Rs 10,890-crore into RRBs. 

These banks were formed under the RRB Act, 1976, with an objective of serving primarily rural areas with basic banking and financial services. However, RRBs can have branches set up for urban operations, too.

The Centre holds 50 per cent stake in RRBs, while 35 per cent and 15 per cent are with the sponsor banks and state governments, respectively.