Sitharaman asks Regional Rural Banks to ensure credit to small, micro enterprises

New Delhi, Aug 22: Union Finance Minister Nirmala Sitharaman on Thursday asked Regional rural banks (RRBs) to ensure easy credit to Micro, Small and Medium Enterprises (MSMEs).

She asked the RRBs to become more customer-friendly and leverage their local connections to further improve performance.

All RRBs have devised customised MSME products aligning with cluster activities. However, they need to regularly review their credit portfolio in that segment, she said.

The Finance Minister chaired a meeting to review the performance of nine Regional Rural Banks (RRBs) of the states of Gujarat, Maharashtra, Madhya Pradesh, Chhattisgarh and Rajasthan, in Udaipur today.

The review meeting focused on business performance, upgrading digital technology services, fostering business growth in MSME clusters, and deepening financial inclusion in rural areas.

Union Finance Minister also highlighted that Sponsor Banks and RRBs must recognise the challenges that lie ahead, especially maintaining asset quality, expanding digital services, and ensuring robust corporate governance are the areas that require continued focus.

Sitharaman noted the lower offtake of the MUDRA scheme in the Bundelkhand region and directed the State Level Bankers' Committee (SLBC) to hold specific meetings with State Government officials, Sponsor Banks and RRBs to improve the performance of the MUDRA scheme along with other financial inclusion schemes in Bundelkhand region and aspirational districts.

Similarly, RRBs were directed to identify potential trades under the PM Vishwakarma scheme in their areas of operation to provide credit.

RRBs were also directed to increase their share in ground-level agriculture credit disbursement and achieve the stated objectives of Priority Sector Lending.

The Union Finance Minister acknowledged the satisfactory improvement in the technology upgradation of the nine RRBs of the Western Central region since 2022 - the year when regular review of RRBs started; and urged these RRBs to continue the momentum in future also.

The Union Finance Minister directed RRBs to leverage their healthy CASA ratio to disseminate more credit and also urged the intervention of RBI in resolving the pending dues to RRBs from State Governments, apart from the efforts being taken by the Government and Sponsor Banks.

The Consolidated Capital to Risk (Weighted) Assets Ratio (CRAR) of RRBs has increased from 7.8 per cent in FY 2021 to 13.7 per cent in FY 2024 and profitability has improved from losses of Rs. 41 crores in FY 2021 to a net profit of Rs. 2,018 crore in FY 2024 and Gross Non-Performing Assets (GNPA) are relatively lower with a ratio of 3.9 per cent.