The Hindu Business Line : Regional rural banks’ net profit decreases

Mangalore, Nov. 28 While the net profit of the regional rural banks (RRBs) came down during 2006-07 when compared to the previous fiscal, there was also a decrease in the number of loss-making RRBs during the period.

The report on ‘Trend and Progress of Banking in India 2006-07’, which was released by Reserve Bank of India on Tuesday, says that net profits of RRBs declined to Rs 596 crore during 2006-07 as against Rs 617 crore during 2005-06.

Increase in interest and other income of RRBs during 2006-07 did not keep pace with the increased expenditure on account of sharp growth in provisions and contingencies and wage bill. Consequently, this affected the net profit of the RRBs during the year.

The structural consolidation among RRBs — which was effected by the Government on September 12, 2005 — has brought down the number of both profit and loss making RRBs during 2006-07. The number of profit-making and loss-making RRBs declined to 81 (111) and 15 (22), respectively. This trend was attributed to the amalgamation process of RRBs that began in 2005. The number of total RRBs stood at 96 (133) during 2006-07.

The report notes the structural consolidation of RRBs has resulted in the formation of new RRBs, which are financially stronger and bigger in size in terms of business volume and outreach, which will enable them to take advantages of economies of scale and reduce their operational costs. With the advantage of local feel and familiarity, RRBs are in a better position to achieve the objectives of rural development and financial inclusion.