Government injects Rs 670 cr into Regional Rural Banks

The government has reinforced Regional Rural Banks (RRBs) with Rs 670 crore in a bid to strengthen the capital base. About one third of the 43 RRBs from north-eastern and eastern regions are in loss and are in dire need of funds to meet the regulatory capital requirement of nine per cent.

According to the data published by the National Bank for Agriculture and Rural Development (NABARD), RRBs as a group recorded a net loss loss of Rs 2,206 crore in the fiscal year ended March 31, 2020 as against Rs 652 crore net loss in FY19. It also showed that gross non-performing assets (NPAs) as a percentage of gross loans outstanding of RRBs marginally declined to 10.4 per cent as on March 31, 2020 from 10.8 per cent as on March 31, 2019. The data showed that deposits and advances of RRBs increased by 10.2 per cent and 9.5 per cent during FY2019-20.

The capital support is provided to these banks by the Center under the current scheme for recapitalization of RRBs. Sources said matching funds were released by sponsor banks and many of the state governments. They said that with the infusion, CRAR of the weak RRBs rose to nine per cent level as per the regulatory norms prescribed by the Reserve Bank of India.

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These banks were formed under RRB Act 1976 to provide credit and other facilities to small farmers, agricultural laborers and artisans in rural areas. The RRBs, as per the central bank’s guidelines, have to provide 75 per cent of their total credit under priority sector lending. It caters to the credit and banking requirements of the agricultural sector and rural areas with focus on small and marginal farmers, micro and small enterprises, rural artisans and weaker sections of the society. They also have to provide lending to micro and small enterprises and small enterpreneurs in rural areas.