Government issues draft guidelines for listing of RRBs; a minimum net worth of ₹ 300 crore required | Tech Reddy

In a bid to allow regional rural banks (RRBs) to raise funds for stock market listing, the government has issued draft guidelines laying down certain basic criteria, including a net worth of at least ₹300 crore during the previous three years .

They must also have capital adequacy above the regulatory minimum level of 9% in each of the previous three years.

RRBs should have a history of profitability and earn an operating profit of minimum ₹15 crore for at least three of the previous five years, according to draft guidelines issued by the finance ministry recently.

Also, there should not be any accumulated losses and the borrower should give a return on equity of at least 10% in three of the previous five years, he said.

According to the draft norms, the responsibility of identifying suitable lenders for the issuance of the initial public offering (IPO) has been left to the respective sponsor banks.

The sponsoring bank shall take into account the relevant norms and regulations of the Securities and Exchange Board of India (Sebi) and Reserve Bank of India (RBI) regarding capital raising and disclosure requirements while identifying RRBs for IPO, he said.

RRBs, which play an important role in agricultural credit, are sponsored by Public Sector Banks (PSBs).

Currently, the Center holds 50% in RRB, while 35% and 15% are with the concerned sponsor banks and state governments, respectively.

These banks were formed under the RRB Act, 1976 with the objective of providing credit and other facilities to small farmers, agricultural laborers and artisans in rural areas.

The Act was amended in 2015, whereby such banks were allowed to raise capital from sources other than the Centre, states and sponsor banks.

The RBI has given RRBs the option of issuing perpetual debt instruments as another way of obtaining regulatory capital and has made these instruments eligible for inclusion as extra tier-1 capital, subject to certain restrictions .

There are currently 43 RRBs supported by 12 public sector banks with 21,856 branches in 26 states and 3 Union Territories – Puducherry, Jammu & Kashmir and Ladakh.

These banks have 28.3 crore depositors and 2.6 crore borrowers. A total of 30 out of 43 RRBs together earned a net profit of ₹ 1,682 crore in FY’21.