{"id":4980,"date":"2022-10-22T00:00:00","date_gmt":"2022-10-22T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/22-10-2022\/rrbs-to-extend-credit-for-msmes\/"},"modified":"2022-10-22T00:00:00","modified_gmt":"2022-10-22T00:00:00","slug":"rrbs-to-extend-credit-for-msmes","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/22-10-2022\/rrbs-to-extend-credit-for-msmes","title":{"rendered":"RRBs to extend credit for MSMEs"},"content":{"rendered":"<p><span style=\"font-size:11pt\"><span style=\"font-family:\"Book Antiqua\",serif\"><strong>In News<\/strong><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">RRBs will soon extend credit for education, housing and even small businesses in rural India.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:12pt\"><span style=\"font-family:\"Book Antiqua\",serif\"><strong>More about the news<\/strong><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">About:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><strong>To provide credit to rural consumers,<\/strong><\/span><span style=\"font-size:12pt\"> the government is planning to leverage the <\/span><span style=\"font-size:12pt\"><strong>15,000-odd strong network of the 43 Regional Rural Banks (RRBs)<\/strong><\/span><span style=\"font-size:12pt\"> in the country by asking them<\/span><span style=\"font-size:12pt\"><strong> to expand their portfolio<\/strong><\/span><span style=\"font-size:12pt\"> by adding new segments.<\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">Rural banks, for instance, would be asked to look beyond crop loans and also provide loans for <\/span><span style=\"font-size:12pt\"><strong>tractors, small businesses,<\/strong><\/span><span style=\"font-size:12pt\"> <\/span><span style=\"font-size:12pt\"><strong>education and housing loans<\/strong><\/span><span style=\"font-size:12pt\"> in rural areas.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">Background:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">This push to the RRBs by the government comes at a time when the <\/span><span style=\"font-size:12pt\"><strong>Department of Financial Services<\/strong><\/span><span style=\"font-size:12pt\"> has flagged concerns about public-sector banks having<\/span><span style=\"font-size:12pt\"><strong> slowed lending to education loans<\/strong><\/span><span style=\"font-size:12pt\">.<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">This is due to <\/span><span style=\"font-size:12pt\"><strong>higher defaults<\/strong><\/span><span style=\"font-size:12pt\"> and the <\/span><span style=\"font-size:12pt\"><strong>continuing struggle of the Micro Small and Medium Enterprise (MSME) sector\u00a0<\/strong><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">MSME has suffered the most in the wake of the Covid-19 pandemic and national and local lockdowns.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">EASE reforms:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">The initiatives and targets will be part of the <\/span><span style=\"font-size:12pt\"><strong>Enhanced Access &#038; Service Excellence (EASE) reforms<\/strong><\/span><span style=\"font-size:12pt\"> being undertaken by the Centre.\u00a0<\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">EASE reforms were <\/span><span style=\"font-size:12pt\"><strong>launched in 2018 <\/strong><\/span><span style=\"font-size:12pt\">for the <\/span><span style=\"font-size:12pt\"><strong>public sector banks<\/strong><\/span><span style=\"font-size:12pt\"> and are <\/span><span style=\"font-size:12pt\"><strong>currently in their fifth phase<\/strong><\/span><span style=\"font-size:12pt\">.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">The rural advantage<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">Providing RRBs a new mandate may serve two purposes:\u00a0<\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">It will help them expand their business by leveraging their huge rural network and local understanding, and\u00a0<\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">It will also enhance credit access to rural consumers for purposes such as education, housing and micro businesses.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:12pt\"><span style=\"font-family:\"Book Antiqua\",serif\"><strong>MSME Sector In India\u00a0<\/strong><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">About:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">The Micro Small and Medium Enterprises (MSMEs) sector is a major contributor to the socio-economic development of the country.\u00a0<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">In India, the sector has gained significant importance due to its contribution to the Gross Domestic Product (GDP) of the country and exports.\u00a0<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">The sector has also contributed immensely with respect to entrepreneurship development especially in semi-urban and rural areas of India.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><strong>Financial challenges Faced by MSME Sector in India<\/strong><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">Mounting NPAs if MSMEs:<\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">According to the RBI, bad loans of MSMEs now account for 9.6 per cent of gross advances of Rs 17.33 lakh crore as against 8.2 per cent in 2020.<\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">The MSME sector was among the most pandemic afflicted sectors. Thousands of MSMEs either shut down or became sick after the government announced a nationwide strict lockdown.<\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">Restructuring schemes and packages didn\u2019t benefit thousands of units which were already in default.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">Non-availability\/Delays of Funds:<\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">Mounting losses and debts, non-availability of proper financial help and delays from the government, reluctance from the banks for the funding, etc.<\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">MSMEs in India typically rely on NBFCs for their financing needs, which in itself has been enduring a liquidity crunch since September 2018.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">Steps taken to revive the position:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">To revive activity, the RBI and the government introduced several measures including the Emergency Credit Line Guarantee Scheme (ECLGS) which provided Rs 3 lakh crore of unsecured loans to MSMEs and businesses.<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">The RBI also extended the scheme of one-time restructuring of loans to MSMEs without an asset classification downgrade and permitted bank lending to NBFCs for on-lending to agriculture, MSMEs and housing to be classified as priority sector lending (PSL).<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><strong>ASPIRE scheme, Credit Guarantee Scheme, Credit Linked Capital Subsidy Scheme (CLCSS), Zero Defect Zero Effect model<\/strong><\/span><span style=\"font-size:12pt\">, etc.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<div>\n<table cellspacing=\"0\" style=\"border-collapse:collapse; border:none; width:614px\">\n<tbody>\n<tr>\n<td style=\"background-color:#fff2cc; border-bottom:1px solid #000000; border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; vertical-align:top; width:614px\">\n<p><span style=\"font-size:13pt\"><span style=\"font-family:\"Book Antiqua\",serif\"><strong>About Regional Rural Banks (RRBs)<\/strong><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">Regional Rural Banks Act, 1976:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">Regional Rural Banks (RRBs) were set up as government-sponsored, regional based rural lending institutions under the Regional Rural Banks Act, 1976.<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">The RRBs were established as per the recommendations of the Narasimham Committee to cater to the rural credit needs of the farming and other rural communities.<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">The Prathama Grameen Bank was the first bank to be established on 02nd October 1975. The Syndicate Bank became the first commercial bank to sponsor the Prathama Grameen Bank RRB<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">Operation:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">Regional Rural Banks (RRBs) are government owned scheduled commercial banks of India that operate at regional level in different states of India.<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">The area of operation is limited to the area notified by the government of India covering, and it covers one or more districts in the State.<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">Ownership<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">The equity of the Regional Rural Banks is held by the stakeholders in a fixed proportion. This proportion is 50:35:15, distributed as:<\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">Central Government \u2013 50%<\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">Sponsor Bank \u2013 35%<\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">State Government \u2013 15%<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">Aim:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">They were created to serve rural areas with basic banking and financial services.\u00a0<\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:12pt\">However, RRBs also have urban branches.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">Functions:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">RRBs perform various functions such as providing banking facilities to rural and semi-urban areas, carrying out government operations like disbursement of wages of MGNREGA workers and distribution of pensions, providing para-banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, and UPI services.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\">Objectives of RRBs:<\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">To provide cheap and liberal credit facilities to small and marginal farmers, agriculture labourers, artisans, small entrepreneurs and other weaker sections.\u00a0<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\">To save the rural poor from the moneylenders.\u00a0<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">To act as a catalyst element and thereby accelerate the economic growth in the particular region.<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">To cultivate the banking habits among the rural people and mobilize savings for the economic development of rural areas.\u00a0<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">To increase employment opportunities by encouraging trade and commerce in rural areas. To encourage entrepreneurship in rural areas.\u00a0<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">To cater to the needs of the backward areas which are not covered by the other efforts of the Government.\u00a0<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">To develop underdeveloped regions and thereby strive to remove the economic disparity between regions.\u00a0<\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\">Identify the financial need, especially in rural areas.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-size:13pt\"><span style=\"font-family:\"Book Antiqua\",serif\"><strong>Source: TH<\/strong><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News RRBs will soon extend credit for education, housing and even small businesses in rural India. More about the news About: To provide credit to rural consumers, the government is planning to leverage the 15,000-odd strong network of the 43 Regional Rural Banks (RRBs) in the country by asking them to expand their portfolio [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4981,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[31,30,26,46],"class_list":["post-4980","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-government-policies-interventions","tag-gs-2","tag-gs-3","tag-indian-economy-related-issues"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/3758385Screenshot_20221022-194007_Chrome.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/4980","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\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=4980"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/4980\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/4981"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=4980"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=4980"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=4980"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}