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HomeEconomy4 regional rural banks' public issues coming up

4 regional rural banks’ public issues coming up

In a bid to make RRBs eligible and successfully raise capital from the market, a slew of reforms has been implemented including compliance with corporate governance, technology upgrade and capacity-building

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New Delhi: The government has identified 4 Regional Rural Banks (RRBs) for listing on stock exchanges in line with the Union Budget 2018-19. Guidelines for the listing are almost ready. These include details like the quantum of stake dilution, the instrument to be floated and category of possible investors in the public issue, sources said.

They further said the four RRBs are eligible to come out with initial public offerings (IPOs) and they may hit the markets this year.

It is proposed to allow strong RRBs to raise from the market to enable them to increase their credit to the rural economy, Finance Minister had said in his Budget speech earlier this year.

In a bid to make RRBs eligible and successfully raise from the market, a slew of reforms has been implemented including compliance with corporate governance, technology upgrade and capacity-building.

There are 56 RRBs in the country with a combined balance sheet size of Rs 4.7 lakh crore. Of these, 50 are in profit, according to financial statements of RRBs for March 2017, released by National Bank For Agriculture and Rural Development (Nabard).

[pullquote]It is proposed to allow strong RRBs to raise from the market to enable them to increase their credit to the rural economy

— Finance Minister Arun Jaitley, Budget speech, 2018[/pullquote]

RRBs operating through about 21,200 branches witnessed 17% rise in net profit to Rs 2,950 crore in 2016-17. Their loans and advances outstanding under various schemes rose 15% to Rs 3.5 lakh crore as of March 2017.

These banks were formed under the RRB Act, 1976 with an objective to provide credit and other facilities to small farmers, agricultural labourers and artisans in rural areas.

The Act was amended in 2015 whereby such banks were permitted to raise from sources other than Centre, states and sponsor banks.

Currently, the Centre holds 50% in RRBs while 35% and 15% are with concerned sponsor banks and governments, respectively.

Even after stake dilution, the shareholding of the Centre and the sponsor public sector banks together cannot come below 51% as per the amended Act. As a result, the ownership and control would remain with the government.

In order to improve the financial health of RRBs, the government initiated consolidation of RRBs in a phased manner in 2005.

The number of RRBs came down to 133 in 2006 from 196 at the end of March 2005. It further came down to 105 and subsequently to 82 at the end of March 2012 and subsequently to 56.

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