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Regional Rural Bank
Context:
The Union Finance Minister Nirmala Sitharaman emphasised the need for regional rural banks (RRBs) to adopt more employee-friendly policies to reduce high attrition rates. She highlighted the importance of prioritising local postings to retain staff, improve customer interactions, and ultimately enhance the overall performance of the banks.
About RRB:
- They are jointly owned by the Central Government (50%), State Governments (15%), and sponsoring banks (35%).
- Each RRB operates in a designated region, typically covering one or more districts, to serve the financial needs of the rural population, including small and marginal farmers, agricultural labourers, and rural artisans.
- As of now, there are 43 Regional Rural Banks operating in India, each catering to the specific needs of their respective regions.
- They offer 75% loans under Priority sector lending(PSL).
- The Narasimham Committee proposed the establishment of Regional Rural Banks.
Issues faced by RRB:
- Technological Limitations: Lack of modern banking technologies like core banking solutions, internet, and mobile banking.
- Poor Infrastructure: Inadequate facilities and amenities in many RRB branches.
- Financial Struggles: Rising operational costs and declining profitability due to limited business activities.
- Limited Credit Expansion: Slow growth in credit base, particularly in the MSME sector.
- Governance Issues: Challenges arising from joint ownership structure involving central government, state government, and sponsor banks.
- Human Resource Challenges: High attrition rate thus facing Difficulties in attracting and retaining skilled personnel in rural areas, along with inadequate training for rural banking needs.
Steps taken by the Indian government to Strengthen RRB:
- Capital Infusion: Significant government funding to improve RRBs’ financial position.
- Technology Upgrades: Support for modernising banking systems and digital capabilities.
- Policy Enhancements: Emphasis on digital services and increased penetration of schemes like Pradhan Mantri Mudra Yojana.
- NABARD Roadmap: Development of a plan for 22 RRBs, including potential mergers with sponsor banks.
- Employee-Friendly Policies: Focus on reducing attrition rates through measures like prioritising local postings.
- Digital Services Push: Encouragement to maintain updated technology and offer digital banking services, especially in remote areas.
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Finance Minister suggestion to boost RRB functioning:
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