Meeting to Review Regional Rural Banks (RRBs) Performance

• 04 Dec 2024

Why in News? 

Recently, the Union Minister for Finance reviewed the performance of eight Regional Rural Banks (RRBs) from the Eastern Region, covering Bihar, Jharkhand, Odisha, and West Bengal, during a meeting held in Patna.

Key Points 

• Focus Areas of the Meeting: 
  • Business performance, digital technology upgrades, and fostering growth in agriculture and micro-industry-related activities were the primary focus. 
  • The Union Finance Minister emphasized increasing credit disbursement under flagship schemes like MUDRA and PM Vishwakarma with sponsor banks' support. 
• Directives for Agriculture and Allied Activities: 
  • RRBs were directed to boost ground-level agricultural credit, especially for allied activities such as dairy, animal husbandry, and fisheries. 
  • Uttar Bihar Gramin Bank was tasked to enhance credit for fisheries and foxnut (makhana) to realize their regional potential. 
• Emphasis on Technology Upgradation: 
  • The Union Finance Minister stressed accelerating technology enhancements to improve RRB efficiency and service delivery. 
  • Financial parameters showed improvement, with Capital Adequacy Ratio rising from 7.8% (FY 2022) to 9.4% (FY 2024) and Gross Non-Performing Assets (GNPA) decreasing from 25% to 15% during the same period. 
  • RRBs in the Eastern Region recorded a profit of Rs 625 crore in FY 2024 compared to a net loss of Rs 690 crore in FY 2023. 
• Financial Inclusion Initiatives: 
  • The Union Finance Minister emphasized saturating beneficiaries under Financial Inclusion schemes like Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), and Atal Pension Yojana (APY). 
  • Sponsor banks were urged to work with RRBs to ensure the success of these initiatives. 
• Digital Services and Deadlines: 
  • RRBs were directed to offer Internet Banking, Mobile Banking, and Unified Payments Interface (UPI) services to all customers by December 2024. 
  • Sponsor banks were tasked with promoting these services to increase customer adoption. 
• Promoting Self-Employment and SHGs: 
  • The One District One Product (ODOP) program was highlighted as a tool to boost self-employment in the region. 
  • State governments were urged to collaborate with National Bank for Agriculture and Rural Development (NABARD) and SIDBI to provide support for women SHGs, including training and marketing assistance. 

Regional Rural Banks (RRBs)

• RRBs were established in 1975 under the provisions of the Ordinance promulgated on 26th September 1975 and Regional Rural Banks Act, 1976. 
• These are financial institutions which ensure adequate credit for agriculture and other rural sectors. 
• They combine the characteristics of a cooperative in terms of the familiarity of the rural problems and a commercial bank in terms of its professionalism and ability to mobilise financial resources. 
• After the reforms in the 1990s, the government in 2005-06 initiated a consolidation program that resulted in the number of RRBs declining from 196 in 2005 to 43 in FY21.

Pradhan Mantri Mudra Yojana (PMMY) 

• PMMY was launched by the Government of India in 2015. 
• The PMMY provides collateral-free institutional loans up to Rs. 10 lakhs for small business enterprises. 
• It is provided by Member Lending Institutions (MLIs) i.e. Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), Non-Banking Financial Companies (NBFCs) and Micro Finance Institutions (MFIs). 
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