Regional Rural Banks (RRBs), which play a crucial role in credit disbursement in remote areas, will be able to list on the stock exchange and raise funds if they have a net worth of at least Rs 300 crore over the past three years and whether they meet certain other criteria.
According to the draft guidelines issued by the Ministry of Finance, these banks must also have sufficient capital of 9% in each of the previous three years and record an operating profit of at least Rs 15 crore for at least three of the previous five years. years. There should be no accumulated losses and the RRB should have delivered at least a 10% return on equity in three of the previous five years, according to the standards.
The guidelines come after Finance Minister Nirmala Sitharaman in July asked the Ministry of Financial Services and sponsor banks to formulate a clear roadmap to further strengthen RRBs within a limited time frame and support post-pandemic economic recovery, being given their crucial role in stimulating credit flow in rural India. The Association of Indian Banks (IBA) has been urged to take the lead in ensuring technological advancements in RRBs, which is a key prerequisite for their modernization.
Under the new standards, sponsor banks were asked to identify RRBs eligible for listing. Sponsors will also need to consider relevant rules and regulations issued by stock exchange and banking regulators – Sebi and RBI – with respect to capital raising and disclosure requirements when focusing on eligible RRBs.