Regional Rural Banks expanding outreach for financial inclusion

Microfinance Focus, Aug 18, 2010: In an Annual Review Meeting of Regional Rural Banks (RRBs) held on 25th July, 2010 under the chairmanship of Mr. Pranab Mukherjee, the Finance Minister of India, the status of Financial Inclusion in the country was reviewed.

Issues like credit flow to agriculture, current viability, non-performing assets position, Core Banking Solutions (CBS) in RRBs and branch expansion of RRBs were discussed in the meeting.

As on 31 March 2010, there were 82 RRBs with a network of 15475 branches spread over 619 districts in 26 States and 1 Union Territory. 

To expand their outreach, the RRBs were given a target in 2007 to open 2000 branches by March, 2011. They are required to migrate to Core Banking Solution (CBS) by September 2011 and 21 RRBs have already achieved 100% CBS status.

The Sponsor Banks would provide the required support to the RRBs sponsored by them for this purpose and for up gradation of Technology for Financial Inclusion, the RRBs are being provided funds from Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund (FITF) by NABARD.

The meeting also highlighted that the profitability of RRBs, as a segment, has been improving. As of March this year only 3 RRBs out of 82 RRBs were incurring losses.  (Manipur Rural Bank –Rs. 2.98 crore, Puduval Bharthiar Grama Bank –Rs. 0.22 crore and Mahakaushall Gramin Bank- Rs. 2.45 crore)

Some of the factors responsible for losses in RRBs are identified   as : low recovery, high NPA, low business level, low productivity per branch and per staff, high cost structure, poor financial management, limited area of operation, non-viable level of operation in branches located in resource-poor areas etc.  Further, one of the RRBs, namely Puduval Bharthiar Grama Bank, which was set up in March 2008, has not yet reached a breakeven point;

This information was given by the Minister of State for Finance Sh. Namo Narain Meena in a written reply to a question raised in Rajya Sabha.

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