Government to work out a revamp plan for regional rural banks

The government is looking to work out a revamp plan for regional rural banks (RRBs), including further consolidation, listing on the bourses and addressing key operational issues such as allowing all RRBs to offer internet banking services.

At present there are 43 RRBs in the country, and the government is keen to have one large regional rural bank for each state. "There is a scope for further consolidation and raising capital through the markets," a government official aware of the deliberations said on condition of anonymity.

At present, states such as UP, Rajasthan, Andhra Pradesh, Maharashtra and Madhya Pradesh have two or more RRBs. "There is also a suggestion to have a common framework for RRBs, on the lines of core banking solution (CBS), so that all of them can provide online banking services to their customers," said another executive aware of the discussions.

At present only 19 RRBs have internet banking facilities and 37 have mobile banking licences. Existing regulations allow only those RRBs to offer internet banking which maintain minimum statutory capital to risk-weighted assets ratio (CRAR) at more than 10%.

The National Bank for Agriculture and Rural Development (Nabard) will spearhead the initiative, the second official said, adding that the development bank is already working on a roadmap for 22 RRBs which is expected to be implemented by the end of this year.

Last year, the government had set up a panel with members drawn from Nabard and the RBI to give recommendations for strengthening the regional lenders. The government has contributed ₹4,084 crore towards RRB recapitalisation in 2021-22, of which ₹3,197 crore has been released to 21 lenders.

According to an SBI research report, after consecutive years of losses in 2018-19 and 2019-20, RRBs as a whole reported a consolidated net profit of Rs 1,682 crore for 2020-21.