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Modi Govt allocates Rs.6212 crore to strengthen Regional Rural Banks


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The Indian government, under the leadership of Prime Minister Narendra Modi, has allocated a substantial amount of Rs 6212.03 crore to regional rural banks (RRBs) as part of the recapitalization scheme. These RRBs are public banks that operate at a regional level in various states across India. They were established in 1975 with the purpose of providing basic banking and financial services to rural areas, with a specific focus on supporting small and marginal farmers, agricultural laborers, artisans, and small entrepreneurs.

The performance of RRBs has witnessed significant improvement, as indicated by their consolidated Capital to Risk-weighted Assets Ratio (CRAR) reaching an all-time high of 13.83 percent as of December 31, 2023. This demonstrates the banks’ strengthened financial position and their ability to manage risks effectively.

Under the recapitalization scheme, the government provides financial support to RRBs to ensure they maintain the prescribed minimum capital-to-risk (Weighted) Assets ratio of nine percent. This infusion of capital helps strengthen the banks’ balance sheets and enables them to continue serving their customers and communities effectively.

Furthermore, Indian RRBs achieved their highest-ever consolidated net profit of Rs 4,974 crores in the financial year 2022-23, with a net profit of Rs 5,236 crore recorded up to the third quarter of the financial year 2023-24. This remarkable financial performance reflects the banks’ successful efforts in providing sustainable banking services and facilitating economic growth in rural areas.

Additionally, the credit expansion facilitated by RRBs has led to a notable increase in the consolidated credit-deposit ratio, reaching 72.13 percent as of September 30, 2023. This ratio represents the proportion of loans extended by the banks in relation to the deposits they receive. The current ratio is the highest recorded in the past 15 years, highlighting the banks’ commitment to supporting economic activities and meeting the credit needs of their customers.

These achievements have taken place within the framework of a three-year board-approved viability plan (VP) for the financial year 2022-23. This comprehensive plan outlines a well-defined implementation mechanism aimed at ensuring the sustainable viability of RRBs and their ability to continue providing essential banking and financial services to rural communities, agriculture activities, and small businesses.

In India, there are a total of 43 RRBs, which are sponsored by 12 scheduled commercial banks. These banks play a crucial role in promoting financial inclusion, empowering rural communities, and driving economic development in the country. The government’s support through the recapitalization scheme underscores the importance of these institutions and their contribution to the overall growth and prosperity of India.

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