Tag: ONE RRB

The Indian government is set to implement the “One State, One RRB” policy. Policy Objectives Consolidate the existing 43 Regional Rural Banks (RRBs) into 28. Enhance Operational Efficiency: Reduce redundancies and improve service quality. Cost Rationalisation: Achieve better cost management through consolidation. Strengthen Credit Flow: Boost credit availability in rural areas by fortifying RRBs’ financial strength. About Regional Rural Banks (RRBs) Formation: Established through collaboration of the Central Government, State Governments, and Sponsoring Commercial Banks. Mission: Provide credit to underserved rural populations—small/marginal farmers, agricultural laborers, and weaker sections. Functions: Rural Credit: Mobilize financial resources and provide loans to rural areas. Government Operations: Disburse MGNREGA wages, pensions, etc. Para-Banking Services: Locker facilities, debit/credit cards, mobile/Internet banking, UPI, etc. Origin: Recommended by Narasimham Committee on Rural Credit (1975). Established under the RRB Act, 1976 (Ordinance passed on 26 Sept 1975). First RRB: Rathama Grameen Bank (established on 2 Oct 1975). Structure: Hybrid model combining cooperative and commercial bank Area of Operation: Limited to specific districts notified by the Government of India. Ownership: Central Government: 50% Sponsoring Bank: 35% State Government: 15% Regulation & Supervision: Regulated by: RBI Supervised by: NABARD Funding Sources: Owned funds, deposits, borrowings from NABARD, Sponsor Banks, SIDBI, and the National Housing Bank. Management: Board of Directors: 1 Chairman, 3 Central Govt-nominated Directors, 2 State Govt-nominated Directors, 3 Sponsor Bank-nominated Directors. Priority Sector Lending (PSL): 75% of outstanding advances (higher than 40% for Scheduled Commercial Banks). Capital Infusion for RRBs FY 2021-22: Government infused ₹5,445 crore over two years as growth capital. Purpose: Strengthen operational capabilities and promote development. Recent Performance Highlights of RRBs Record Profit: ₹7,571 crore in FY 2023-24. Capital Adequacy Ratio: Reached 2% by March 31, 2024. GNPA (Gross Non-Performing Assets): At an all-time low of 1%, indicating improved asset quality. Historical Context of RRB Consolidation RRBs Established: Under the RRB Act, 1976 to provide credit to small farmers, agricultural laborers, and rural artisans. Consolidation Timeline: 2004-05: Process began. 2020-21: Number reduced from 196 to 43 through three phases. Amendments to the RRB Act (2015) Key Changes: Allowed RRBs to raise capital from sources beyond the Centre, states, and sponsor banks. Ownership Structure: Government: 50% stake. Sponsor Banks: 35% stake. State Governments: 15% stake. Current RRB Network Operational Status (as of March 31, 2024): 43 RRBs across 22,069 branches in 26 states and 3 Union Territories. Coverage across 700 districts. Digital Initiatives: Many RRBs offering digital banking services to improve rural accessibility. Implications of the “One State, One RRB” Policy Enhanced Service Delivery: Improved efficiency in operations and customer service. Financial Stability: Stronger balance sheets and better risk management. Rural Credit Growth: Increased credit flow to rural areas, supporting agriculture and rural development. Global Benchmark: Sets an example for efficient rural banking models globally.

Tag: ONE RRB

ONE STATE, ONE RRB

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