Government to strengthen Regional Rural Banks; Rs 6200 cr allotted for recapitalisation

The Modi government has allocated Rs 6212.03 crore to Regional Rural Banks (RRBs) as part of the recapitalization scheme on March 6.

RRBs, established in 1975 and owned by the Indian government, function at the regional level across various states. They were set up with the objective of offering fundamental banking and financial services to rural regions, specifically targeting small and marginal farmers, agricultural laborers, artisans, and small entrepreneurs.

The performance of RRBs has witnessed notable improvement, with a consolidated Capital to Risk-weighted Assets Ratio (CRAR) reaching an all-time high of 13.83 percent by December 31, 2023. This indicates their strengthened financial position.

Under the recapitalization scheme, RRBs receive support to maintain a minimum prescribed capital-to-risk (weighted) assets ratio of nine percent.

Indian RRBs have achieved their highest-ever consolidated net profit of Rs 4,974 crores in FY22-23 and a net profit of Rs 5,236 crore by the third quarter of FY 2023-24.

Moreover, credit expansion has resulted in a rise in the consolidated credit-deposit ratio to 72.13 percent as of September 30, 2023, the highest in the past 15 years.

This progress aligns with the 3-year board-approved viability plan (VP) initiated in the financial year 2022-23. The plan includes a well-defined implementation mechanism aimed at ensuring sustainable viability.

RRBs play a crucial role in extending banking and financial services to rural communities, supporting agricultural activities, and nurturing small businesses. Currently, there are 43 RRBs sponsored by 12 scheduled commercial banks in India.