Union Finance Minister Nirmala Sitharaman on Thursday urged the Reserve Bank of India (RBI) to intervene to resolve the outstanding dues of regional rural banks (RRBs) of state governments, in addition to the efforts being made by the government and sponsor banks.
During a review meeting on the performance of nine RRBs from the states of Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh and Rajasthan held in Udaipur, the Finance Minister directed the RRBs to leverage their healthy Current Savings Account (CASA) ratio to provide more credit.
The meeting was attended by M Nagaraju, Secretary, Department of Financial Services (DFS), Additional Secretary, other senior officials of DFS, Chairmen of RRBs, CEOs of sponsor banks, representatives of RBI, Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (NABARD) and senior officials of all five states.
The Finance Minister also directed RRBs to become more customer-friendly and use their local connections to further improve their performance. Sponsor banks play an important role in these efforts by providing technical assistance, sharing best practices, and ensuring that RRBs have access to the resources they need to succeed.
Sitharaman stressed the importance of RRB branches located in micro, small and medium enterprises (MSME) clusters to undertake active outreach activities to ensure credit to micro and small enterprises. While all RRBs have designed customised products for MSMEs in line with the cluster activities, they are required to periodically review their credit portfolios in this segment, according to the Finance Ministry press release.
The Finance Minister also stressed that sponsoring banks and RRBs must recognise the challenges ahead, particularly in maintaining asset quality, expanding digital services and ensuring sound corporate governance.
RRBs’ consolidated capital to risk-weighted assets ratio (CRAR) has increased from 7.8 per cent in FY21 to 13.7 per cent in FY24, and profitability has improved from a loss of Rs 41 crore in FY21 to a net profit of Rs 2,018 crore in FY24. Gross non-performing assets (GNPA) are relatively lower at 3.9 per cent.
During the same meeting, the Finance Minister highlighted the potential of PM Surya Ghar Muft Bijli Yojana scheme in the states of Gujarat and Rajasthan and urged the RRBs to create awareness and provide credit under the scheme.
“The potential of One District One Product (ODOP) programme to increase credit penetration by RRBs was also highlighted. Similarly, RRBs were directed to identify potential operations under PM Vishwakarma scheme in their areas of operation for providing credit. RRBs were also directed to increase their share in disbursement of agricultural credit at ground level and achieve the set targets of priority sector lending,” the Finance Ministry press release added.
However, Sitharaman noted the lower uptake of MUDRA scheme in Bundelkhand region and directed the State Level Bankers Committee (SLBC) to hold specific meetings with state government officials, sponsor banks and RRBs to improve the performance of MUDRA scheme and other financial inclusion schemes in Bundelkhand region and aspirational districts.
Earlier this week, the Finance Minister met senior officials of the RRBs in New Delhi, where the banks were asked to expedite the one-state-one RRB initiative.
First published: August 22, 2024 | 19:46 IS
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