{"id":213662,"date":"2022-11-09T19:56:02","date_gmt":"2022-11-09T14:26:02","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=213662"},"modified":"2022-11-09T19:56:02","modified_gmt":"2022-11-09T14:26:02","slug":"the-irrelevance-of-regional-rural-banks","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-irrelevance-of-regional-rural-banks\/","title":{"rendered":"The irrelevance of regional rural banks"},"content":{"rendered":"\n

Source<\/span><\/b>: The post is based on the article <\/span>\u201cThe irrelevance of regional rural banks\u201d <\/span><\/b>published in <\/span>the Business Standard <\/span><\/b>on\u00a0<\/span>9th November 2022<\/span><\/b>.<\/span>\u00a0<\/span><\/p>\n

Syllabus:\u00a0<\/span><\/b>GS 3 \u2013 Indian Economy.<\/span><\/p>\n

Relevance<\/span><\/b>: A<\/span>bout regional rural banks (RRBs).<\/span><\/p>\n

News<\/span><\/b>: Several of the regional rural banks (RRBs), are now facing an existential crisis due to dwindling business and soaring bad assets.<\/p>\n

About the present status of RRBs<\/h5>\n

The RRBs set up in the mid-1970s to provide financial services to agricultural workers and labourers. Many of them have either collapsed or got merged with their parent banks.<\/p>\n

The overall business of rural financial institutions has generally gone up in the last decade. But the performance of RRBs does not go up. For instance, a)<\/strong> The number of RRBs has nearly halved from 82 to 43, b)<\/strong> RRBs non-performing assets have more than doubled from 2.05% to 4.68%, c)<\/strong> The volume of the credit disbursed by the RRBs, on the other hand, has shrunk from 13% to 11%. But the share of commercial banks in agricultural loans increased from 65% in 2010-11 to 76% in 2021-22.<\/p>\n

What are the steps taken by the government to improve RRBs?<\/h5>\n

a)<\/strong> Merged some stand-alone RRBs with larger units to cut their overhead costs and scale up the business volumes, b)<\/strong> Inducted funds to expand their capital base, c)<\/strong> Over Rs 4,000 crore has been provided towards recapitalising the RRBs in last fiscal year.<\/p>\n

Why there is a growing irrelevance of the RRBs?<\/h5>\n

-The RRBs have been left primarily with the government-sponsored business of servicing the official schemes involving direct benefit transfers.<\/p>\n

-RRBs have 1)<\/strong> Limited business activity, 2)<\/strong> Swelling operational costs, 3)<\/strong> Lack of internet banking facilities, 4)<\/strong> Some of the RRBs, even today, have not fully digitised their operations, and 5) <\/strong>Many of them do not expand their business operations beyond farm-related activities such as reaching out to micro, small and medium enterprises located in the rural areas and offer them banking services.<\/p>\n

So, most people in rural areas, therefore, prefer to deal with commercial banks.<\/p>\n

-Further, most of the RRBs are ineligible for being listed on the stock exchanges because they do not meet the required pre-conditions. This is because, the RRBs need to have earned an operational profit of over Rs 15 crore in three out of the previous five financial years, besides a net worth of at least Rs 300 crore and a capital adequacy ratio of above 9 per cent to qualify for listing on the stock exchange.<\/p>\n\n\n\n
Read more: Unprofitable, growing bad assets: The tale of existential crisis at RRBs<\/a><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
What will be the better course of action for RRBs?<\/h5>\n

The best course for most RRBs is to either merge with their sponsoring banks or close down. They have very little space to survive as stand-alone financial enterprises.<\/p>\n\n\n\n
Read more: Regional Rural Banks (RRBs) have been successful in fulfilling the financial needs of agriculture sector and rural economy<\/a><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on the article \u201cThe irrelevance of regional rural banks\u201d published in the Business Standard on\u00a09th November 2022.\u00a0 Syllabus:\u00a0GS 3 \u2013 Indian Economy. Relevance: About regional rural banks (RRBs). News: Several of the regional rural banks (RRBs), are now facing an existential crisis due to dwindling business and soaring bad assets.… Continue reading The irrelevance of regional rural banks<\/span><\/a><\/p>\n","protected":false},"author":10311,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,216],"class_list":["post-213662","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":{"total":6,"cached_at":"","cached_date":1698474333},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/213662","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10311"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=213662"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/213662\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=213662"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=213662"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=213662"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}