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RRBs Lose Lucrative Deposits Due to National Portal Exclusion
RRBs are losing substantial business due to their exclusion from key National Portals, with Tamil Nadu Grama Bank and Madhya Pradesh Gramin Bank missing out on major deposits. Last year, the MP of Madurai informed the Finance Minister that TNGB was losing business due to policy restrictions and requested amendments to Clause 14 of the Nidhi Rules, 2014 to resolve the issue.
Author: Saurav Kumar
Published: March 12, 2025
Regional Rural Banks (RRBs) are suffering significant business losses as their exclusion from key National Portals continues to restrict their ability to compete with commercial banks. Due to policy restrictions under the Nidhi Rules, 2014, RRBs like Tamil Nadu Grama Bank and Madhya Gramin Bank have missed out on substantial term deposits, further impacting their growth and financial stability.
RRBs Losing Business Due to Policy Restrictions
Tamil Nadu Grama Bank (TNGB) has been unable to accept deposits from Nidhi companies due to restrictions under Rule 14 of the Nidhi Rules, 2014. As a result, businesses that would have preferred depositing with RRBs have had to shift their funds to Scheduled Commercial Banks, affecting rural banking institutions' ability to grow and compete.
Highlighting the same issue, Madurai MP S. Venkatesan wrote to Finance Minister Nirmala Sitharaman last year, urging an amendment to Clause 14 of the Nidhi Rules, 2014. He emphasized that the change would enable RRBs to secure fresh business deposits from Nidhi companies.
However, the Chairman of Tamil Nadu Grama Bank told Kanal that RRBs are already aligned with the national portal, and their integration will be implemented soon, as the Ministry of Finance is actively working on the issue.
Similarly, Madhya Pradesh Gramin Bank (MGB) recently lost a ₹6 crore E-Bank Guarantee request because RRBs are not empaneled under the National E-Governance Service Limited (NeSL). This restriction led to the loss of a ₹2 crore deposit and ₹12 lakh in commission earnings, further highlighting how policy limitations are preventing RRBs from offering essential banking services.
Raising strong concerns over the issue, the All India Regional Rural Bank Employees Association (AIRRBEA), in a letter dated March 8, 2024, urged Finance Minister Nirmala Sitharaman to integrate RRBs into key National Portals.
Despite their critical role in financial inclusion, RRBs continue to face systemic disadvantages due to outdated regulations. Closing these policy gaps is crucial for RRBs to compete fairly and deliver comprehensive financial services to rural customers.