In order to guarantee that small and micro businesses receive credit, Finance Minister Nirmala Sitharaman instructed the leaders of Regional Rural Banks (RRBs) to implement an aggressive outreach policy in MSME clusters during a meeting that took place here on Monday.
Speakers from the RBI, SIDBI, NABARD, Chairpersons of RRBs, CEOs of sponsor banks, and other senior officials from the Ministry attended the meeting as the Secretary-Designate of the Department of Financial Services (DFS).
The meeting’s main topics were improving digital technology services, boosting business growth in MSME clusters—which have a significant potential to create jobs—and business performance.
In order to ensure credit to small and micro enterprises in industries like textile, handicrafts, wooden furniture, clay pots, jute handicrafts, leather, food processing, dairy farming, packing materials, etc. that hold immense potential for increasing the loan portfolio for RRBs, the Finance Minister emphasized the need for an active outreach by the RRB branches located in MSME clusters.
In order to boost banking penetration, she urged all RRBs to provide appropriate MSME products that complemented their cluster activities and make use of local and personal relationships.
With regard to co-lending/risk-sharing arrangements and refinancing for the MSME portfolio, the SIDBI was instructed to support RRBs. Sitharaman commended the RRBs for their enhanced financial performance and technological advancements since the regular review was started in 2022 during a presentation at the review meeting. She also urged the rural banks to maintain the momentum going forward.
In FY 2023–2024, RRBs reported their largest-ever combined net profit of Rs 7,571 crore.
With 6.1%, the Gross Non-Performing Assets (NPA) ratio is the lowest it has been in the last ten years.
The Finance Minister emphasized that, in order for RRBs to remain competitive, they need to have their own modern technological stack. She also mentioned that, in locations such as the northeastern states and hilly regions where physical connectivity can be difficult, digital banking services such as mobile banking will be extremely beneficial. She continued, “The sponsor banks play a major role in these initiatives by sharing best practices, offering technical support, and making sure RRBs have access to the resources they need to succeed.”
Sitharaman further requested that the sponsor banks and the RRBs acknowledge the difficulties that lie ahead and keep their attention on upholding strong corporate governance, growing digital services, and preserving asset quality.
