Finance Minister asks Gramin Banks to implement employee friendly policies

Union Finance Minister Nirmala Sitharaman has called on regional rural banks (RRBs) to implement more employee-friendly policies to address high attrition rates. This directive was shared during a recent meeting held in New Delhi.

Meeting Insights

During the meeting, the Finance Minister suggested that RRBs should prioritize local postings to mitigate attrition. One of the RRB chairpersons present stated, “The Finance Minister emphasized that prioritizing local postings would improve interactions with customers and enhance overall bank performance.”

Another senior bank official noted, “The FM expressed concern over the high attrition rates within RRBs and highlighted that local postings could help in improving customer relations and potentially boost bank performance.”

Participants

The meeting was chaired by the Finance Minister and attended by several key figures, including M. Nagaraju, the secretary-designate of the Department of Financial Services (DFS), the additional secretary, other senior DFS officials, representatives from the Reserve Bank of India (RBI), Small Industries Development Bank of India (Sidbi), National Bank for Agriculture and Rural Development (Nabard), chairpersons of RRBs, and CEOs of sponsor banks.

Current Challenges

According to data from Nabard, the number of employees in 43 RRBs decreased from 95,833 in the financial year (FY) 2022 to 91,664 in FY 2023. Conversely, the number of branches saw a slight increase from 21,892 in FY 2022 to 21,995 in FY 2023.

Mohit Choudhary, General Secretary of the Prathama UP Gramin Bank Officers Association, highlighted, “One significant reason for the high turnover is the better opportunities available in major scheduled commercial banks (SCBs). Despite similar pay, SCBs offer additional facilities that are significantly better. Employees who relocate from other states to work in RRBs often struggle with rural living conditions, prompting them to seek other opportunities.”

Service Conditions

Abdul Sayeed Khan, General Secretary of the National Federation of Regional Rural Bank Officers, pointed out that the service conditions in RRBs are still not comparable to those in SCBs. He noted, “RRBs are not as employee-friendly, and promotions in RRBs are less frequent compared to SCBs.”

In 2018, the Supreme Court’s ruling mandated that RRB employees receive pensions equivalent to those in nationalized banks. The Court rejected a special leave petition filed by the government in 2012, enforcing a uniform pension scheme for all RRBs in accordance with the 1993 bipartite settlement.

Future Directions

In addition to addressing employee issues, the Finance Minister directed all 43 RRBs to focus on improving business performance, upgrading digital technology services, and promoting growth in MSME clusters. She emphasized the importance of maintaining an up-to-date technology stack to remain relevant, especially in regions with challenging physical connectivity, such as the northeastern states and hilly areas.

Historical Context

RRBs were established in September 1975 to provide banking and credit facilities for agriculture and rural sectors. Designed as low-cost institutions, they combine the local familiarity of cooperatives with the professionalism of commercial banks. The first RRB was Prathama Bank, headquartered in Moradabad, Uttar Pradesh, and sponsored by Syndicate Bank with an authorized capital of Rs 5 crore.

Sponsorship Overview

The largest public sector lender, State Bank of India (SBI), sponsors the most RRBs, totaling 14. Punjab National Bank sponsors nine, and Canara Bank sponsors four. Bank of Baroda, Bank of India, and Indian Bank each sponsor three RRBs, while Central Bank of India sponsors two. UCO Bank, J&K Bank, Indian Overseas Bank, Union Bank of India, and Bank of Maharashtra each sponsor one RRB.