Union Finance Minister Nirmala Sitharaman has asked regional rural banks (RRBs) to adopt more employee-friendly policies to reduce attrition rates, according to two senior bankers who participated in a meeting held in New Delhi.
“The Finance Minister (FM) suggested prioritising local postings to achieve this (reduce attrition rates),” said one of the RRB chairpersons who attended the meeting on Monday.
“The FM took serious note of the high attrition rates in RRBs. She also mentioned that prioritising local postings would help improve interactions with customers, potentially leading to better bank performance,” said the other senior bank official, who was also part of the meeting.
The Finance Minister chaired the meeting, which was attended by M. Nagaraju, secretary-designate of the Department of Financial Services (DFS), additional secretary, other senior DFS officials, representatives from the Reserve Bank of India (RBI), Small Industries Development Bank of India (Sidbi), National Bank for Agriculture and Rural Development (Nabard), chairpersons of RRBs, and chief executive officers (CEOs) of sponsor banks.
According to Nabard data, the total number of employees in 43 RRBs decreased from 95,833 in financial year (FY) 2022 to 91,664 in FY23. However, the number of branches saw a minor increase from 21,892 in FY22 to 21,995 in FY23.
“One of the major reasons employees leave RRBs is that they find better opportunities in major scheduled commercial banks. Despite receiving similar pay as in SCBs, the additional facilities offered by SCBs are significantly better. Moreover, employees who relocate from other states to work in RRBs often find it challenging to manage life in rural areas. This situation drives them to seek other opportunities,” said Mohit Choudhary, general secretary of Prathama UP Gramin Bank Officers Association.
RRBs were established regionally and are oriented towards rural areas, with capital contributed by the Government of India, state governments, and sponsored banks under the RRB Act, 1976.
“Service conditions in RRBs are still not on par with those in SCBs. Specifically, RRBs are not as employee-friendly. In SCBs, employees receive promotions more rapidly compared to RRBs,” said Abdul Sayeed Khan, general secretary of the National Federation of Regional Rural Bank Officers.
In 2018, the Supreme Court’s verdict paved the way for RRB employees to receive pensions comparable to those in nationalised banks. The Court has since rejected a special leave petition filed by the government in 2012 and instructed that a uniform pension scheme be implemented across all RRBs, in line with the scheme available in nationalised banks as per the 1993 bipartite settlement.
During the same meeting, the Finance Minister instructed all 43 RRBs to focus on enhancing business performance, upgrading digital technology services, and fostering growth in MSME clusters. RRBs were advised to maintain an up-to-date technology stack to stay relevant. The Finance Minister emphasised that digital banking services, such as mobile banking, would be particularly beneficial for regions with challenging physical connectivity, such as the northeastern states and hilly areas.
RRBs were established in September 1975 to provide sufficient banking and credit facilities for agriculture and other rural sectors. These were envisaged as low-cost institutions, combining the local feel and familiarity of cooperatives with the professionalism of commercial banks. The first RRB was Prathama Bank, with its head office in Moradabad, Uttar Pradesh. It was sponsored by Syndicate Bank with an authorised capital of Rs 5 crore.
The largest public sector lender, State Bank of India (SBI), sponsors the most RRBs (14), followed by Punjab National Bank (nine) and Canara Bank (four). Bank of Baroda, Bank of India, and Indian Bank sponsor three RRBs each, Central Bank of India sponsors two, UCO Bank, J&K Bank, Indian Overseas Bank, Union Bank of India, and Bank of Maharashtra sponsor one each.
First Published: Aug 21 2024 | 10:17 PM IS