Regional rural banks (RRBs), which play a crucial role in credit disbursement in remote areas, will be eligible to list on stock exchanges and raise funds if they have net worth of at least Rs 300 crore over the previous three years and if they fulfil certain other criteria.
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As per the draft guidelines issued by the Finance Ministry, such banks must also have a capital adequacy of 9 per cent in each of the previous three years and recorded operating profit of at least Rs 15 crore for a minimum of three out of the preceding five years. There should not be any accumulated loss and the RRB should have offered at least 10 per cent return on equity in three out of the previous five years, according to the norms.
The guidelines come after Finance Minister Nirmala Sitharaman in July asked the Department of Financial Services and sponsor banks to formulate a clear roadmap to further strengthen the RRBs in a time-bound manner and support the post-pandemic economic recovery, given their crucial role in boosting credit flow in rural India. The Indian Banks’ Association (IBA) was asked to take the initiative to ensure technological advancements at RRBs, which is a key prerequisite to modernising them.
Under the new norms, sponsor banks have been asked to identify the RRBs that are eligible for listing. The sponsors will also have to factor in relevant rules and regulations floated by both stock market and banking regulators — Sebi and RBI — with regard to capital raising and disclosure requirements when they zero in on eligible RRBs.
