Regional rural banks may be allowed to graduate as SFBs

Regional Rural Banks (RRBs) should be given the option to graduate into small finance banks (SFBs) in line with cooperative banks or be granted on-tap licenses to become SFBs, State Bank of India (SBI) Research said in its report. “In keeping with the fast-paced changes in the banking space and to facilitate growth, a scheme for voluntary transition of Urban Co-operative Banks (UCBs) into SFBs was introduced in September 2018.

RRBs may also be permitted to graduate into SFB in line with Cooperative banks or granted on-tap license to RRBs to become SFBs”, the report said. In fact, some of the large regional rural banks are bigger than the SFBs operating the market. India’s largest RRB in terms of size of business – Baroda U.P. Bank (Rs. 72,015 crore) is bigger than the largest SFB (AU SFB) – which has business (deposits + advances) size of Rs. 70,588 crore as of March 2021.