• UGI USER
  • Jan 25, 2024
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GOVERNMENT’S RRB CONSOLIDATION REVIEW

Why in the News?

  • The government eyes potential consolidation of Regional Rural Banks (RRBs) post-evaluation against Sustainable Viability Plan (SVP) targets.
  • A comprehensive year-end assessment will determine the need for consolidation, emphasizing efficiency and competitiveness.

Current Status :

  • Currently, 43 RRBs operate with government support, demonstrating efficiency and enhanced credit flow after consolidation.
  • Recent RBI data indicates a decline in RRBs below the regulatory minimum CRAR.
About Regional Rural Banks (RRBs)

·   Establishment: RRBs were formed in 1975 under the Ordinance of September 26, 1975, and the Regional Rural Banks Act, 1976.

·   Purpose: They serve as financial institutions ensuring sufficient credit for agriculture and rural sectors.

·   Hybrid Characteristics: RRBs combine cooperative familiarity with rural issues and commercial bank professionalism.

·   Reforms: Post-1990s reforms, a consolidation program in 2005-06 reduced RRBs from 196 to 43 by FY21.

Capital to Risk-Weighted Assets Ratio (CRAR):

Capital to Risk-Weighted Assets Ratio (CRAR) is a financial metric determining a bank’s capital adequacy. It measures the proportion of a bank’s capital to its risk-weighted assets, ensuring sufficient buffer against potential losses.

A Sustainable Viability Plan (SVP) :

A Sustainable Viability Plan (SVP) is a strategic framework aimed at ensuring the long-term sustainability of businesses or projects. It incorporates environmentally and socially responsible practices to balance economic, environmental, and social considerations for lasting viability and success.