FM Nirmala Sitharaman seeks RBI help to clear RRB dues with states

The finance minister also directed RRBs to become more customer-friendly and use their local connections to further improve performance

Finance Minister (FM) Nirmala Sitharaman on Thursday sought the Reserve Bank of India’s (RBI’s) intervention for clearing the pending dues of Regional Rural Banks (RRBs) with state governments.

During a review meeting on the performance of nine RRBs from Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh, and Rajasthan, held in Udaipur, Sitharaman directed RRBs to leverage their healthy Current Account Savings Account (Casa) ratio to provide more credit.

The meeting was attended by M Nagaraju, secretary of the department of financial Services (DFS), additional secretary, senior DFS officials, chairpersons of RRBs, CEOs of sponsor banks, representatives from the RBI, Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (Nabard), and senior officers from these five states.

 

The FM also directed RRBs to become more customer-friendly and use their local connections to further improve performance. Sponsor banks play a significant role in these efforts by providing technical assistance, sharing best practices, and ensuring that RRBs have access to the resources they need to succeed.

She emphasised the importance of active outreach by RRB branches located in Micro, Small, and Medium Enterprises (MSME) clusters to ensure credit for small and micro enterprises. Although all RRBs have devised customised MSME products aligned with cluster activities, they need to regularly review their credit portfolios in this segment, according to the finance ministry’s press statement.

The finance minister highlighted that sponsor banks and RRBs must recognise the challenges ahead, particularly in maintaining asset quality, expanding digital services, and ensuring robust corporate governance.

The Consolidated Capital to Risk (Weighted) Assets Ratio (CRAR) of RRBs has increased from 7.8 per cent in FY2021 to 13.7 per cent in FY 2024 and profitability has improved from losses of Rs 41 crore in FY2021 to net profit of Rs 2,018 crore in FY2024 and Gross Non-Performing Assets (GNPA) are relatively lower with a ratio of 3.9 per cent.

During the meeting, Sitharaman noted the potential of the PM Surya Ghar Muft Bijli Yojana scheme in Gujarat and Rajasthan and urged RRBs to generate awareness and provide credit under the scheme.

 “The potential of the One District One Product (ODOP) programme was also highlighted to increase credit penetration by RRBs. Similarly, RRBs were directed to identify potential trades under the PM Vishwakarma scheme in their areas of operation to provide credit. RRBs were also directed to increase their share in ground-level agriculture credit disbursement and achieve the stated objectives of Priority Sector Lending,” the finance ministry’s press statement said.

Sitharaman noted the lower offtake of the MUDRA scheme in the 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 the MUDRA scheme and other financial inclusion schemes in the Bundelkhand region and aspirational districts.