According to two people acquainted with the situation, Union Finance Minister Nirmala Sitharaman would examine the performance of Regional Rural Banks (RRBs) following Parliament's Budget session. "The Finance Minister will evaluate the performance of RRBs after August 13, 2024. The review will include discussions on improving RRBs' digital capabilities," said a senior government official.
The Regional Rural Banks (RRBs) were founded in 1975 under the requirements of the Ordinance of September 26, 1975 and the Regional Rural Banks Act of 1976. In the past, bank employee groups have called on the Finance Minister to combine RRBs with the sponsor banks in order to maintain the general sustainability and efficiency of the banking industry.
"By providing the same services, competition between public sector banks and RRBs is wasting limited financial resources. Nevertheless, a sizable portion of our rural populace is excluded from the advantages of modern, technologically advanced banking products. In a joint statement addressed to Sitharaman, the All India Bank Officers’ Confederation and the All India Bank Employees Association, representing over 6 lakh bank employees, said that merging RRBs with sponsor banks will ensure the delivery of a uniform product range to the entire clientele, accelerating the growth of the rural economy and prioritizing sector lending, which is crucial for the government’s plan for robust Indian economic growth."
With 21,995 branches and operations covering 30.53 crore deposit accounts and 2.90 crore loan accounts in 26 states and 3 Union Territories (Puducherry, Jammu and Kashmir, and Ladakh) as of March 31, 2023, there were 43 RRBs sponsored by 12 Scheduled Commercial Banks. RRBs are absent from the states of Goa and Sikkim. With the exception of Punjab and Sind Bank, all public sector banks sponsor one or more RRBs. The only bank in the private sector to support an RRB is J&K Bank. The majority of RRB branches - 92 percent - are located in rural or semi-urban regions. During FY 2022–2023 RRBs' overall business size surpassed the noteworthy milestone of Rs 10 trillion, rising at a rate of 10.1 percent year over year (Y-o-Y).
RRBs' asset quality condition improved in FY 2022–2023, as evidenced by the gross Non-performing Asset (NPA) ratio falling to 7.28 percent as of March 31, 2023 - the lowest level in the preceding seven years. Of the 43 RRBs, 34 reported a decrease in the total gross non-performing asset (NPA) amount, while 37 RRBs reported a decrease in the GNPA%. During FY 2022–2023 there was also an improvement in the net NPA and Provisioning Coverage Ratio (PCR), which as of March 31, 2023, stood at 3.2% and 59.2%, respectively.
