Regional Rural Banks (RRBs) Showcase a Remarkable Turnaround in 2023

In the fiscal year 2022-23, Regional Rural Banks (RRBs) have demonstrated commendable performance, according to the official report from the National Bank for Agriculture and Rural Development (NABARD). Key indicators like profit, Capital to Risk Weighted Assets Ratio (CRAR), and Gross Non-Performing Assets (GNPA) were considered in the report.

This positive turnaround occurs at a critical moment, coinciding with the urgent need to fill 30,000 vacant positions in RRBs across India.

Against this backdrop, RRBs have achieved historic highs across all metrics in FY 2022-23. They recorded the highest consolidated net profit ever at Rs. 4,974 crore, with a consolidated Capital to Risk Weighted Assets Ratio (CRAR), reaching an all-time high of 13.43% as of March 31, 2023. The GNPA, measuring asset quality, at 7.28%, was the lowest in the past seven years. The credit expansion led to a consolidated CD ratio increase to 67.50%, the highest in over 15 years.

Regional Rural Banks (RRBs) were established based on the recommendations of the Narasimham Working Group (1975) as a distinct set of regionally oriented rural banks, combining the ‘local feel and familiarity of rural problems’, a characteristic of cooperatives, and ‘professionalism and large resource base’, a characteristic of commercial banks.

Image: Profit and Loss making 43 RRBs

Profitable Transformation
The number of loss-making RRBs has significantly reduced, declining from 13 in FY 2020-21 to 6 in FY 2022-23. Of the 13 RRBs in losses in FY 2021, 7 turned profitable in FY 2022-2023, which are:

 1. Uttar Bihar Gramin Bank 

2. Madhya Pradesh Gramin Bank 

3. Madhyanchal Gramin Bank 

4. Vidharbha Konkan Gramin Bank 

5. Nagaland Rural Bank 

6. Odisha Gramya Bank 

7. Utkal Grameen Bank

Furthermore, 4 RRBs that turned profitable around in FY 2022-23 after years of losses, which are:

1. Nagaland Rural Bank (8 years), 

2. Madhya Pradesh Gramin Bank (4 years), 

3. Vidharbha Konkan Gramin Bank (3 years), 

4. Uttar Bihar Gramin Bank (3 years).  

Top Five Best Performing RRBs
Among the well-performing states, RRBs in Telangana lead; followed by RRBs in Andhra Pradesh, Rajasthan, Uttar Pradesh, and Tamil Nadu.

As of March 31, 2023, 43 RRBs sponsored by 12 Scheduled Commercial Banks, with 21,995 branches, conducted operations in 26 States and 3 Union Territories, managing 30.53 crore deposit accounts and 2.90 crore loan accounts.

A Successful Model for People
Venkateshwara Reddy, Secretary General of All India Regional Rural Bank Employees Association (AIRRBEA), emphasised the significant impact of RRBs on millions of rural families. He stated, “RRBs have demonstrated remarkable improvements in critical areas like profit, NPAs, and CD ratio, showcasing their commitment to serving the rural population.”

He hailed RRBs as a prime example of a people-friendly model in India's banking sector.

Despite this success, the good performance of RRBs occurs amid ongoing demands from the All India Regional Rural Bank Employees Association. They call for the formation of NRBI with State-level RRBs, total delinking from Sponsor Banks, cessation of cross-selling business of Sponsor Banks, and the regularisation of Daily Waged/Part-time/Casual Workers.