Tag: RRB

RRB employees to observe one-day strike on September 27 against govt’s divestment plan, BFSI News, ET BFSI

Banking & Finance

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The regional rural bank (RRB) employees are going to observe a one-day strike on September 27 opposing the government’s plan to divest its 50% share in each of the rural banks in favour of their respective sponsor banks.

The employee unions are instead demanding formation of a national rural regional bank and delinking of it with any sponsor bank. The union flag bearers are of the view that there has always been conflicts of interest between mainstream commercial banks and the RRBs they sponsor.

India has 43 RRBs with a network of around 22,000 branches mostly in the hinterlands to ensure banking facilities for farmers and artisans. These banks collectively employ one lakh people.

The central government holds 50% in each of the RRBs while their respective sponsor banks hold 35%. The balance 15% in RRBs is held by the respective state governments according to their areas of operation. For example, West Bengal has three RRBs within its boundary and the state holds 15% in each of these banks.

The All India Regional Rural Bank Employees Association, a coordinating body of National Federation of RRB Officers & National Federation of RRB Employees, said that relinquishing central government share would eventually lead to privatisation and that’s why they are opposing it.

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Short of lending targets, banks seek priority sector tag for retail, infrastructure, BFSI News, ET BFSI

Banking & Finance

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Banks have reached out to the government seeking priority sector tag for retail trade and infrastructure.

This comes as most lenders are struggling to meet their priority sector targets with premium on lending certificates rising by almost 200 basis points in the last one year. At present only, regional rural banks or RRBs are suppliers of priority sector lending credit.

“We have had informal discussions with the Reserve Bank of India, and have made representation to the government as well,” said a bank executive, aware of the developments, adding that there was a need to broaden the priority sector.

At present lending towards eight sectors including agriculture, micro and small medium enterprises, export credit, housing, education, renewable energy and social infrastructure is considered eligible for priority sector loans. Commercial lenders have to mandatorily deploy 40% of their adjusted net bank credit (ANBC) towards these sectors, of which 18% is allocated towards agriculture.

The latest data from RBI indicates that overall priority sector lending for scheduled commercial banks stood at 40.54% in 2020-21 (as at the end of December 2020) even though there was a marginal shortfall for private sector and foreign banks.

“There are various subcategories within this structure and most banks are unable to meet these requirements and hence there is a need to identify new potential sectors,” the above quoted executive said adding that most big lenders resort to buying priority sector lending certificates (PSLCs) to meet their regulatory requirements. A bank running short of meeting targets can purchase priority sector lending certificates from a lender having surplus for a fee.

“Today, only regional rural banks (RRBs) are suppliers of PSLC and most sponsoring banks buy it from their RRBs,” he said, adding that non-banking finance companies or NBFCs also have underwriting limitations.

The total trading volume of PSLCs recorded a growth of 25.9% and stood at Rs 5.89 lakh crore in 2020-21 as compared with 43.1% growth a year ago.



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RRBs asked to focus on financial literacy, credit counselling to boost credit flow

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Regional Rural Banks should open financial literacy and credit counselling centres to improve credit flow, according to Brij Mohan Sharma, Executive Director of Canara Bank.

Addressing the officials of Karnataka Vikas Grameena Bank (KVGB) after naming the building of its head office in Dharwad as ‘Vikas Bhavan’ on Friday, he said RRBs are playing a significant role in rural development.

The main aim of RRB should be inclusive growth by promoting financial inclusion, financial literacy, accelerating priority sector lending, inculcating the repayment habits, and motivating the customers for digital banking.

Stating that more than 70 per cent of the people live in villages, Sharma said the standard of living of most has not improved as expected. He asked the branch managers to sanction loans without any inhibition so that the people below the poverty line could be brought up in the ladder of economic progress.

The Chairman of KVGB, P Gopi Krishna, said KVGB has been registering a good growth every year, and the business has crossed ₹27,800 crore now. The bank currently serves more than 2,045 villages with 629 branches, with an emphasis on lending, he said.

KVGB operates in nine districts of Karnataka. They are: Dharwad, Haveri, Gadag, Belagavi, Vijayapura, Bagalkot, Uttara Kannada, Udupi and Dakshina Kannada.

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RBI allows banks to buy-back Certificates of Deposits

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The Reserve Bank of India (RBI) has decided to permit issuers of Certificates of Deposit (CD) to buy back their CDs before maturity, subject to certain conditions.

This move is aimed at facilitating flexibility in liquidity management by issuers (Banks) of CDs.

Also read: RBI keeps rates unchanged to support growth

RBI also decided to permit Regional Rural Banks (RRBs) to issue Certificates of Deposit (CDs). This will provide RRBs greater flexibility in raising short term funds.

CDs are negotiable money market instruments and issued in dematerialised form or as a Usance Promissory Note, for funds deposited at a bank or other eligible financial institution (FI) for a specified time period.

Banks can issue CDs for maturities from 7 days to one year whereas eligible FIs can issue for maturities from 1 year to 3 years.

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Merge RRBs with sponsor banks, AIBEA urges Finance Minister, BFSI News, ET BFSI

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Chennai, The merger of Regional Rural Banks (RRB) with their sponsor banks would avoid business cannibalization and reduction in administrative overheads, the All India Bank Employees’ Association (AIBEA) said on Monday.

In a letter to Union Finance Minister Nirmala Sitharaman, AIBEA General Secretary C.H. Venkatachalam said instead of further reforms in the RRB sector, it would be better to merge them with their sponsor banks as this will add to the rural network of the latter and at the same time, eliminate the weaknesses that they suffer presently.

“Monitoring would be much more effective since they would become part of the bank and come under the direct control of the management of the sponsor banks. This would also obviate a lot of administrative overheads and expenses,” he said.

While the objectives of RRB are laudable, their very nature of the business makes them fragile and vulnerable, he noted.

“More often than not, these RRBs even face competition from their own sponsor banks too. In this background, there have been many efforts to restructure the RRBs to make them strong and vibrant but the results have not been that encouraging because of the intrinsic reasons and they are bound to be so,” Venkatachalam said.



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