RRBs post all-time high net profit in FY24, boosting IPO prospects
Forty-three regional rural banks (RRBs) posted a consolidated net profit of ₹7,796 crore in FY24, up 26 per cent from ₹6,178 crore in FY23, brightening prospects for some to tap the capital market, including through an initial public offering (IPO).
Further, the number of RRBs posting a net loss has declined to three (aggregating ₹225 crore) from six (aggregating ₹1,205 crore).
The consolidated net profit of 40 RRBs in FY2024 was ₹7,571 crore, an all-time high, according to the National Bank for Agriculture and Rural Development’s (NABARD) annual report. Thirty-seven RRBs posted a consolidated net profit of ₹4,974 crore in FY23.
The Finance Ministry issued draft guidelines for RRBs in 2022 to enable them to raise resources from the capital market, including via rights issues, private placements with select investors such as large banks and insurance companies, and IPOs.
RRBs were established in 1975 to secure credit flow to small and marginal farmers, agricultural labourers, artisans, and weaker sections of society. These banks are three-way joint ventures between the Central government (50 per cent stake), the State government in which the bank operates (15 per cent), and a sponsor bank (35 per cent).
Asset quality, measured by gross non-performing assets (GNPA), declined to 6.1 per cent of gross advances (from 7.3 per cent in FY23) and is at its lowest in the last 10 years, NABARD said. The net NPAs position also improved to 2.4 per cent of net advances (from 3.2 per cent).
The development bank noted that the government’s decision to sanction ₹10,890 crore of recapitalisation assistance to RRBs in FY2022 and FY2023 compares exceptionally well with the total capital infusion of ₹8,393 crore by all stakeholders from 1975 to 2021.
Consequent upon the recapitalisation assistance for RRBs, which are regulated by the RBI and supervised by NABARD, and the rollout of the viability plan, the performance of RRBs at a consolidated level has improved significantly during FY2024 and has reached historic highs on all fronts, according to the report.
As of March-end 2024, there were 43 RRBs (sponsored by 12 scheduled commercial banks – 11 public sector banks and Jammu & Kashmir Bank) with 22,069 branches spread across 26 States and three Union Territories (Puducherry, Jammu & Kashmir, and Ladakh). They had 31.3 crore deposit accounts and three crore loan accounts.
Deposits and advances of RRBs stood at ₹6.6 lakh crore (3.2 per cent share in deposits among all banks) and ₹4.7 lakh crore (2.9 per cent share in advances among all banks), respectively, as of March-end 2024.