Financial health of regional rural banks in North-East improves after continued review: Finance Ministry

Itanagar, October 1, 2024—The Regional Rural Banks in North East as a whole have witnessed considerable improvement in their financial health since the regular reviews started in 2022, said the Finance Ministry. This was disclosed during the key review meeting taken by Union Finance Minister Nirmala Sitharaman on Monday in Itanagar, Arunachal Pradesh.

The meeting focused on the functioning of seven RRBs which services the North-Eastern states of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura. The RRB sector has experienced significant improvement in financial soundness and technological up-gradation during the last two years.

Financial Revival
A review meeting reported to the Finance Minister Sitharaman about RRBs’ financial revival. The RRBs, as a system have shown a considerable turnaround with a net profit of ₹205 crore in FY 2024 compared to a net loss of ₹11 crore in FY 2023. Concurrently, the GNPA ratio has declined from 15.6 per cent in FY 2022 to 7.3% in FY 2024. Sequential recovery in bottom line coupled with an increase in GNPA ratio as it recedes into red lines suggests that financial recovery is ushering in a significant step forward for the rural banking institutions given their pivotal role in facilitating regional economic growth.

He has given prominence to such banks in the pursuit of growth in the rural sector and asked them to increase the credit disbursal under key schemes such as the Pradhan Mantri MUDRA Yojana and the Pradhan Mantri Vishwakarma Yojana.
Focus on Agriculture and Allied Sectors
She realized that the agricultural and allied sectors are the backbone of the economy of the North-East and directed RRBs to encourage agriculture, horticulture and allied activities like piggery, goat rearing, sericulture and fisheries. She inspired NABARD to undertake FPO expansion across the entire region for the development of rural productivity and income-generating activities.

Technology and Inclusion
Perhaps, most importantly, the upgradation in technology for RRBs that have moulded their system of function by following regular reviews has been the takeaway from the meeting itself. Such upgradations are a necessity so that banking services reach rural populations at their doorsteps with ease.

The minister handled the aspect of financial inclusion, wherein he directed officials that every potential person in the North East should come under the Pradhan Mantri Jan Dhan Yojana (PMJDY).

She also instructed the RRBs to liaise with the local stakeholders, including DoNER and the North Eastern Council (NEC), in order to understand the credit opportunity for the ODOP vendors.
Banks Access of Specialised MSME Products
The finance minister urged the RRBs to design customized MSME products according to the needs of small business in the region furthered access to banking. These products will take advantage of the connection that an RRB has on the ground to penetrate the market better and develop rural entrepreneurship.

To further encourage easier access to banking services, Sitharaman also directed the RRBs, along with Sponsor Banks and NABARD, to open new banking touch points in the underbanked regions especially in Nagaland and Arunachal Pradesh.

Stakeholder Outreach
The turnout by key stakeholders was forthcoming in this venue-the Secretary of the DFS and the chairmen of RRBs and sponsor banks, senior officials from RBI, NABARD, SIDBI, and representatives of the seven participating states witnessed the event. The overall presence of high-level central and state agency officials called for an improvement in the quality of banking services offered to rural clients in the region.

Sitharaman also appealed for special SLBCs with the involvement of RRBs to tap growth prospects in horticulture, floriculture, sericulture, and animal husbandry. She also nudged the states to resolve the issue of land records which form the bedrock for agricultural credit.

Conclusion
While the review meeting did focus on the revival of North-East’s economy through RRBs, improvement of the past two years underlines the positives, strengthened financials, technological upgradation, and renewed focus on agriculture and allied sectors are seen as the correct planks for these RRBs to become growth drivers in the region.

The regular review of the Finance Ministry has been of paramount importance in paving for these changes, and an increased focus on credit expansion and financial inclusion will further improve the impact of RRBs towards rural development.