{"id":28157,"date":"2024-08-23T19:28:13","date_gmt":"2024-08-23T13:58:13","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=28157"},"modified":"2024-08-30T15:26:44","modified_gmt":"2024-08-30T09:56:44","slug":"performance-review-of-regional-rural-banks-rrbs","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/23-08-2024\/performance-review-of-regional-rural-banks-rrbs","title":{"rendered":"Performance Review of Regional Rural Banks (RRBs)"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/ Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Union Minister for Finance and Corporate Affairs chaired a meeting to review performance of nine Regional Rural Banks (RRBs) of 5 states.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The review meeting focused on business performance, upgrading digital technology services, fostering business growth in <a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/14-03-2022\/micro-small-and-medium-enterprises-msmes-sector\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/ca\/current-affairs\/14-03-2022\/micro-small-and-medium-enterprises-msmes-sector\">MSME<\/a> clusters, and deepening financial inclusion in rural areas.<\/li>\n\n\n\n<li>The RRBs were urged to generate awareness of Government schemes, especially in aspirational districts.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Achievements of RRBs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Consolidated Capital to Risk (Weighted) Assets Ratio (CRAR) <\/strong>of RRBs has increased from 7.8% in FY 2021 to <strong>13.7% in FY 2024.<\/strong><\/li>\n\n\n\n<li>The profitability has improved from losses of Rs. 41 crore in FY 2021 to <strong>net profit of Rs. 2,018 crore in FY 2024<\/strong>.<\/li>\n\n\n\n<li><strong>The <a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/20-10-2021\/gross-npas-of-banks\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/ca\/current-affairs\/20-10-2021\/gross-npas-of-banks\">Gross Non-Performing Assets (GNPA)<\/a><\/strong> are relatively lower with a ratio of <strong>3.9%.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Regional Rural Banks (RRBs)<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>RRBs were established<\/strong> under the provisions of an Ordinance passed on <strong>26 September 1975<\/strong> and the <strong>RRB Act 1987<\/strong> to provide sufficient banking and credit facilities for agriculture and other rural sectors.&nbsp;<\/li>\n\n\n\n<li>The RRBs were established as per the recommendations of the <strong>Narasimham Committee<\/strong> to cater to the rural credit needs of the farming and other rural communities.<\/li>\n\n\n\n<li><strong>The Prathama Grameen Bank<\/strong> was the first bank to be established on 2nd October 1975.\n<ul class=\"wp-block-list\">\n<li>The <strong>Syndicate Bank<\/strong> became the first commercial bank to sponsor the Prathama Grameen Bank RRB.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Operation of RRBs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Regional Rural Banks (RRB) are<strong> Indian Scheduled Commercial Banks <\/strong>(Government Banks) operating at regional level in different states of India.\n<ul class=\"wp-block-list\">\n<li>They have been created with a view of serving primarily the rural areas of India with basic banking and financial services.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>RRBs perform various functions<\/strong> in following heads:\n<ul class=\"wp-block-list\">\n<li>Providing banking facilities to rural and semi \u2013urban areas.<\/li>\n\n\n\n<li>Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pension etc.<\/li>\n\n\n\n<li>Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, UPI etc.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Ownership of RRBs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The equity of the Regional Rural Banks is held by the stakeholders in a fixed proportion.&nbsp;<\/li>\n\n\n\n<li>This proportion is <strong>50:35:15, <\/strong>distributed as:\n<ul class=\"wp-block-list\">\n<li>Central Government \u2013 50%<\/li>\n\n\n\n<li>Sponsor Bank \u2013 35%<\/li>\n\n\n\n<li>State Government \u2013 15%<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Issues with Regional Rural Banks (RRBs)&nbsp;<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>High <a href=\"https:\/\/www.nextias.com\/blog\/non-performing-assets-npas\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/non-performing-assets-npas\/\">Non-Performing Assets (NPAs)<\/a>:<\/strong> RRBs experience a high level of NPAs, particularly in the agricultural sector. This is due to factors like crop failures, natural disasters, and the vulnerability of rural borrowers.<\/li>\n\n\n\n<li><strong>Limited Capital Base: <\/strong>RRBs often operate with a limited capital base, restricting their ability to expand, invest in technology, and meet regulatory capital requirements.<\/li>\n\n\n\n<li><strong>Operational Inefficiencies:<\/strong> RRBs often face operational inefficiencies due to outdated infrastructure, lack of skilled staff, and bureaucratic processes.<\/li>\n\n\n\n<li><strong>Regulatory Constraints: <\/strong>RRBs are subject to various regulatory constraints, including strict lending norms and capital adequacy requirements, which can be challenging to meet given their limited resources.<\/li>\n\n\n\n<li><strong>Mobilization issue:<\/strong> Practical exclusion of the richer rural population restricts deposit mobilization.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Significance of Regional Rural Banks (RRBs)&nbsp;<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Financial Inclusion:&nbsp; <\/strong>RRBs are crucial in extending banking services to rural and remote areas where commercial banks have limited presence. They help bring the unbanked population into the formal banking system.<\/li>\n\n\n\n<li><strong>Support to Agriculture and Allied Sectors: <\/strong>A major focus of RRBs is to provide credit for agricultural activities, including crop production, purchase of agricultural equipment, and other related activities.<\/li>\n\n\n\n<li><strong>Promotion of Rural Entrepreneurship: <\/strong>RRBs play a key role in promoting rural entrepreneurship by providing credit and financial services to small and medium enterprises (SMEs), <a href=\"https:\/\/www.nextias.com\/blog\/self-help-groups-shgs\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/self-help-groups-shgs\/\"><strong>self-help groups (SHGs)<\/strong><\/a>, and individual entrepreneurs in rural areas.<\/li>\n\n\n\n<li><strong>Poverty Alleviation:<\/strong> Through targeted lending programs and government schemes, RRBs contribute to poverty alleviation efforts by providing microfinance and small loans to the poorest segments of society.<\/li>\n\n\n\n<li><strong>Implementation of Government Schemes: <\/strong>RRBs are instrumental in the implementation of various government-sponsored schemes and programs like PMJDY, PMJAY etc<\/li>\n\n\n\n<li><strong>Stabilization of Rural Credit Markets: <\/strong>RRBs help stabilize rural credit markets by providing consistent and regulated sources of credit, reducing the reliance on informal moneylenders who often charge exorbitant interest rates.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Structural Consolidation to Improve Efficiency:<\/strong> Structural consolidation involves merging smaller or weaker RRBs to create larger, stronger entities.<\/li>\n\n\n\n<li><strong>Recapitalization of RRBs for Capital Augmentation: <\/strong>Recapitalization involves infusing additional capital into RRBs to strengthen their financial base.<\/li>\n\n\n\n<li><strong>Periodic Review and Capacity Building of Human Resources: <\/strong>Regularly reviewing the performance and skills of the workforce in RRBs is essential for maintaining a high standard of service. Capacity building involves training and development programs to enhance the skills and knowledge of RRB employees.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.business-standard.com\/economy\/news\/fm-sitharaman-urges-regional-rural-banks-to-reduce-high-attrition-rates-124082100974_1.html\" target=\"_blank\" rel=\"noopener\"><strong>BS<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Union Minister for Finance and Corporate Affairs chaired a meeting to review performance of nine Regional Rural Banks (RRBs) of 5 states.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-28157","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/28157","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=28157"}],"version-history":[{"count":2,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/28157\/revisions"}],"predecessor-version":[{"id":28540,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/28157\/revisions\/28540"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=28157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=28157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=28157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}