RRBs post all-time high net profit in FY24, boosting IPO prospects

In FY24, Regional Rural Banks (RRBs) achieved a record consolidated net profit of ₹7,796 crore, a 26% increase from ₹6,178 crore in FY23, enhancing their prospects for entering the capital market, including through IPOs. The number of loss-making RRBs decreased to three, with combined losses of ₹225 crore, down from six with ₹1,205 crore in losses.

According to NABARD’s annual report, 40 RRBs collectively earned ₹7,571 crore in FY24, marking an all-time high, compared to ₹4,974 crore earned by 37 RRBs in FY23. The Finance Ministry’s 2022 draft guidelines allow RRBs to raise funds from the capital market through rights issues, private placements, and IPOs.

Established in 1975 to provide credit to small farmers, artisans, and marginalized communities, RRBs are joint ventures between the Central government (50% stake), the State government (15%), and a sponsor bank (35%). Their asset quality, as measured by gross non-performing assets (GNPA), improved to 6.1% of gross advances in FY24, down from 7.3% in FY23, marking the lowest GNPA level in the past decade. Net NPAs also improved to 2.4% of net advances from 3.2% the previous year.

NABARD highlighted that the government's ₹10,890 crore recapitalization assistance in FY22 and FY23 significantly outpaced the total capital infusion of ₹8,393 crore by all stakeholders from 1975 to 2021, leading to a notable improvement in RRBs' performance in FY24. As of March-end 2024, there were 43 RRBs, sponsored by 12 scheduled commercial banks, with 22,069 branches across 26 states and three Union Territories. RRBs held deposits of ₹6.6 lakh crore (3.2% of all banks) and advances of ₹4.7 lakh crore (2.9% of all banks).

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