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Increase in operating expenses and provision for non-performing assets (NPAs) have resulted in the net profits of regional rural banks (RRBs) declining by 9.1 per cent in 2017-18.
The ‘Report on Trend and Progress of Banking in India 2017-18’, which was released by the Reserve Bank of India recently, puts the net profits of 56 RRBs in the country at Rs 2,000 crore during 2017-18, against Rs 2,200 crore in 2016-17. At the end of March 2018, these 56 RRBs had a network of 21,747 branches across the country.
The report attributed the decline in net profit to the increase in operating expenses and elevated provisioning on account of deteriorating asset quality. The operating expenses of RRBs increased to Rs 11,600 crore in 2017-18, against Rs 10,400 crore in 2016-17, recording a growth of 11.53 per cent. Of this, the share of the wage bill stood at Rs 6,900 crore (Rs 6,800 crore) during the period.
Provisions and contingencies increased to ₹4,700 crore in 2017-18, from ₹3,200 crore in 2016-17 — a growth of 46.9 per cent. The deterioration in the asset quality of RRBs led to the decline in capital to risk-weighted assets ratio (CRAR) of RRBs — from 13 per cent in 2016-17 to 12.4 per cent in 2017-18.
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