Finance Minister Nirmala Sitharaman chairs review meeting of regional rural banks

Finance Minister Nirmala Sitharaman chaired a review meeting of regional rural banks (RRBs) in the national capital on Monday, discussing an array of aspects including business performance, digital technology services upgrades, and business growth in MSME clusters. The finance minister said that regional rual banks must devise suitable MSME products aligned with cluster activities, and also leverage their personal and local connects to increase banking penetration. 

As many as 43 lenders participated in discussions also attended by the Secretary-Designate, Department of Financial Services (DFS), Additional Secretary and other senior officials from the DFS, besides representatives of the RBI, SIDBI, NABARD, and CEOs of sponsor banks.

Given the crucial role of RRBs in supporting the rural economy, the finance minister urged RRBs, with active support from their sponsor banks, to also put greater thrust on the clear identification of beneficiaries while sanctioning loans under various schemes such as PM Vishwakarma and PM Surya Ghar Muft Bijli Yojana, according to an official statement. The Union Minister also directed regional rural lenders to increase their shares in ground-level agriculture credit disbursement.

During a presentation in the review meeting, Sitharaman appreciated the lenders for visible improvement in their financial performances and technology upgrades since the regular review initiated in 2022. She also urged rural banks to ensure that the momentum sustains in the future.

Rural regional banks recorded their highest ever consolidated net profit of Rs 7,571 crore in FY 2023-24, with a 10-year low level of their gross non-performing asset (GNPA) ratio, at 6.1 per cent, according to the statement. 

During the meeting, the finance minister underlined that RRBs must have their own up-to-date technology stacks to stay relevant.

She also said that digital banking services, like mobile banking, will be a boon for regions with relatively challenging physical connectivity (for instance, in North Eastern states and hilly regions).

Sponsor banks have a significant role in these endeavours by providing technical assistance, sharing best practices, and ensuring that rural regional lenders have access to the resources they need to succeed.

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The finance minister stressed on the need for active outreach by the RRB branches located in MSME clusters to ensure credit to small and micro enterprises in areas like textile, handicrafts, wooden furniture, clay pots, jute handicrafts, leather, food processing, dairy farming, and packing materials. These areas hold immense potential for increasing the loan portfolio for such lenders.

Sitharaman asked sponsor banks and rural regional banks to recognise challenges and to continue focusing on maintaining asset quality, expanding digital services, and ensuring robust corporate governance.