 "Buoyed up by their strong performance, some of the Regional Rural Banks (RRBs) have expressed willingness to go for initial public offerings (IPOs) during their discussion with Finance Minister Nirmala Sitharaman last week.")
Buoyed up by their strong performance, some of the Regional Rural Banks (RRBs) have expressed willingness to go for initial public offerings (IPOs) during their discussion with Finance Minister Nirmala Sitharaman last week.
“In the meeting that happened on August 19, there was some discussion related to market opportunities for RRBs. Some sponsor banks said that a few RRBs are performing so well that they can go to the market for fundraising,” said a senior person in the finance ministry.
The meeting, chaired by Sitharaman, was attended by Department of Financial Services (DFS) secretary-designate M Nagaraju, the department’s additional secretary and other senior officials; representatives from the Reserve Bank of India (RBI), Small Industries Development Bank of India (Sidbi), and National Bank for Agriculture and Rural Development (Nabard); chairpersons of RRBs; and chief executive officers (CEOs) of sponsor banks.
“Out of the total nine RRBs, seven are performing exceptionally well, particularly Prathama UP Gramin Bank and Punjab Gramin Bank. We are considering a public issue for Prathama RRB,” Managing Director and CEO of Punjab National Bank (PNB) Atul Kumar Goel told Business Standard.
The Moradabad-based Prathama RRB was established in 2019 through the amalgamation of two RRBs — Sarva UP Gramin Bank Meerut and Prathama Gramin Bank Moradabad. The bank operates 967 branches across 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 of 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.
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Additionally, these regional lenders must have reported an operating profit before tax of Rs 15 crore in three out of preceding five years. The identified RRBs must also have a return on equity (RoE) of 10 per cent and a return on assets (RoA) of 0.5 per cent in three out of five preceding years.
Furthermore, any lender must not be under the RBI’s prompt corrective action (PCA) framework.
“Through the IPO, we aim to enhance our credibility as a prestigious organization to be part of and worth investing in,” said a senior executive of the RRB.
Krishnan Sankarasubramaniam, former MD & CEO of Punjab & Sind Bank, said: “If RRBs go for IPOs, it will increase accountability to the public and enable them to operate more professionally by acquiring additional funds.”
Tapping market
> RRBs expressed the willingness during their discussion with FM Nirmala Sitharaman last week
> Strong performance of some RRBs behind tapping market for funds
> RRBs also look to enhance their credibility through IPOs
> Public listing to also increase accountability to the public
 "Nirmala Sitharaman, Nirmala, Finance Minister")
 "Nirmala Sitharaman, Nirmala, Finance Minister")
 "Nirmala Sitharaman, Nirmala, Finance Minister")
 "Rural Banks, RRBs")
 "Nirmala Sitharaman, Nirmala, Finance Minister")
