Sitharaman Reviews Performance of Regional Rural Banks in Western Central Region

The review focused on several key areas, including business performance, technological upgrades, fostering growth in MSME clusters, and deepening financial inclusion in rural areas.

Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, chaired a review meeting in Udaipur to assess the performance of nine Regional Rural Banks (RRBs) across Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh, and Rajasthan. The meeting was attended by Shri M. Nagaraju, Secretary of the Department of Financial Services (DFS), along with Additional Secretaries, senior DFS officials, Chairpersons of RRBs, CEOs of Sponsor Banks, and representatives from RBI, SIDBI, NABARD, and senior officers from the five states.

The review focused on several key areas, including business performance, technological upgrades, fostering growth in MSME clusters, and deepening financial inclusion in rural areas. Smt. Sitharaman underscored the crucial role of RRBs in supporting the rural economy and emphasized the need for these banks to raise awareness of government schemes, particularly in aspirational districts.

The Finance Minister expressed concern over 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 enhance the performance of the MUDRA scheme and other financial inclusion initiatives in Bundelkhand and aspirational districts.

Smt. Sitharaman also highlighted the potential of the PM Surya Ghar Muft Bijli Yojana in Gujarat and Rajasthan, urging RRBs to increase awareness and provide credit under the scheme. Additionally, the potential of the One District One Product (ODOP) program was emphasized to boost credit penetration by RRBs. The Minister also directed RRBs to identify potential trades under the PM Vishwakarma scheme in their operational areas and to increase their share in ground-level agriculture credit disbursement, aligning with the objectives of Priority Sector Lending.

The consolidated Capital to Risk (Weighted) Assets Ratio (CRAR) of the RRBs has significantly improved, rising from 7.8% in FY 2021 to 13.7% in FY 2024. Profitability also saw a substantial increase, with the banks turning around from a loss of ₹41 crore in FY 2021 to a net profit of ₹2,018 crore in FY 2024. Gross Non-Performing Assets (GNPA) were reported at a relatively low ratio of 3.9%. Smt. Sitharaman acknowledged the satisfactory technological advancements made by the nine RRBs since 2022 and urged them to maintain this momentum.

The Finance Minister also directed RRBs to leverage their healthy CASA (Current Account Savings Account) ratio to expand credit dissemination. She requested intervention from the RBI to resolve pending dues owed to RRBs by State Governments, in addition to the ongoing efforts by the Government and Sponsor Banks.

Emphasizing the importance of customer friendliness, Smt. Sitharaman encouraged RRBs to leverage their local connections to enhance their performance. Sponsor Banks were urged to play a significant role by providing technical assistance, sharing best practices, and ensuring that RRBs have the necessary resources to succeed.

Smt. Sitharaman also stressed the need for active outreach by RRB branches in MSME clusters to ensure credit access for small and micro enterprises. While RRBs have devised customized MSME products aligned with cluster activities, she urged regular reviews of their credit portfolios in this segment.

The Finance Minister concluded by highlighting the challenges ahead, particularly in maintaining asset quality, expanding digital services, and ensuring robust corporate governance, areas requiring continued focus by both Sponsor Banks and RRBs.