The Government of India (GoI) has issued draft guidelines for listing Regional Rural Banks (RRBs) in the stock market.
Criteria for listing
- The net worth of at least ₹300 crore during the previous three years.
- The respective RRBs should also have capital adequacy above the regulatory minimum level of 9 per cent in each of the preceding 3 years.
- The RRBs should have a profitable record of minimum ₹15 crore for at 3 three out of the previous 5 years.
- The bank should not have any accumulated loss.
- The RRB should have given the return on equity of a minimum of 10 per cent in three out of the preceding 5 years.
Sponsor banks to identify suitable lenders
- If all the criteria are fulfilled then it is the onus of the sponsor banks to identify suitable lenders for issuing an initial public offering of the RRBs.
- The sponsor banks will also make sure that the chosen RRBs comply with the relevant norms and regulations of the Securities and Exchange Board of India (Sebi) and Reserve Bank of India (RBI) related to capital raising and disclosure requirements.
About Regional Rural Banks (RRBs)
- RRBs were formed under the RRB Act, 1976.
- These banks were established to enhance credit creation in rural India, specifically in the agriculture sector.
- RRBs help in providing credit and other facilities to small farmers, agricultural labourers, and artisans in rural areas.
- Currently, 43 RRBs are supported by 12 public sector banks.
- With 21,856 branches, these RRBs have a wide network across rural areas of 26 states and 3 Union Territories of India.
- Currently, the centre holds around 50% stakes in RRBs. Whereas, around 35% stakes are held by respective sponsor banks and the remaining 15%shares are held by state governments.
Policy initiatives
- To increase source of raising funds for RRBs, the Act was amended in 2015. RRBs were permitted to raise capital from sources other than the Centre, states and sponsor banks.
- As of now, the RRBs have the option to issue perpetual debt instruments as another way to obtain regulatory capital.
- RBI has made these instruments eligible for inclusion as extra tier-1 capital, with certain restrictions.
