Encouraged by their strong performance, some of the Regional Rural Banks (RRBs) expressed their willingness to pursue initial public offerings (IPOs) during their discussion with Finance Minister Nirmala Sitharaman last week.
“At the meeting held on August 19, market opportunities for regional reserve banks were discussed. Some sponsoring banks said that some regional reserve banks are performing so well that they can go to the market to raise funds,” said a senior official at the Ministry of Finance.
The meeting, chaired by Sitharaman, was attended by Department of Financial Services (DFS) Secretary-designate M Nagaraju, additional secretary of the department and other senior officials; representatives of the Reserve Bank of India (RBI), Small Industries Development Bank of India (Sidbi) and National Bank for Agriculture and Rural Development (Nabard); chairmen of the RRBs; and chief executive officers (CEOs) of the sponsor banks.
“Of the nine regional reserve banks, seven are performing exceptionally, notably Prathama UP Gramin Bank and Punjab Gramin Bank. We are considering a public issue for Prathama RRB,” said Atul Kumar Goel, MD & CEO, Punjab National Bank (PNB). Commercial standard.
Moradabad-based Prathama RRB was established in 2019 through the merger of two RRBs – Sarva UP Gramin Bank Meerut and Prathama Gramin Bank Moradabad. The bank operates 967 branches in 20 districts of UP: Bulandshahar, Ghaziabad, Meerut, Gautam Budh Nagar, Hapur, Baghpat, Shamli, Saharanpur, Muzaffarnagar, Bijnor, Haridwar, Gonda, Balrampur, Sambhal, Budaun, Jhansi, Lalitpur, Moradabad, Rampur and Amroha.
According to the Finance Ministry’s draft guidelines for 2022, RRBs with a minimum net worth of Rs 300 crore must also have a capital adequacy ratio above the regulatory minimum level of 9 per cent in each of the preceding three years.
Additionally, these regional lenders must have reported a pre-tax operating profit of Rs 15 crore in three of the preceding five years. The identified RRBs must also have a return on equity (RoE) of 10 per cent and return on assets (RoA) of 0.5 per cent in three of the preceding five years.
Furthermore, no lender should be subject to the RBI’s prompt corrective action (PCA) framework.
“Through the IPO, we aim to enhance our credibility as a reputable organisation to be a part of and worth investing in,” said a senior RRB executive.
Krishnan Sankarasubramaniam, former MD and CEO of Punjab & Sind Bank, said: “If RRBs opt for IPOs, it will increase accountability to the public and enable them to operate in a more professional manner by raising additional funds.”
First published: August 28, 2024 | 21:13 IS
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