The country’s largest lender, State Bank of India (SBI) will be planning to list two of the 18 regional rural banks ie. RRBs as its sponsors. They will likely to unlock the value embedded in the chosen financiers that have some strong profits and potentially robust growth.
NABARD is currently working on the proposal that sent by SBI and reportedly it also plans to merge almost five RRBs in the Northeast part. The MD, associate, and subsidiaries at SBI Dinesh Khara said that apart from merging, they will create one bank with a network across the developing region.
SBI plans to list two RRBs
“We are planning to take Andhra Pradesh Grameena Vikas Bank( APGVB) & Saurashtra Gramin Bank(SGB) to the market very soon. These banks are more profitable, and also have a good network both in rural and urban areas of their respective states and they can use this money for the growth.” Said by Khara.
According to a report, APGVB has registered a net profit of Rs 352 crore in the fiscal year that ended in March 2017 and showed a huge rise from Rs. 233 crore a year ago. While SGB made a Rs 39 crore net profit and up from Rs 17 crore a year ago.
Khara also revealed that this listing may take two years for the completion. The biggest lender of India, SBI is planning to become the first public sector lender to list its rural lenders after the approval of the RRB Amendment Bill 2014. This brand new law allows these banks to increase capital form source as compared to the central and state governments & sponsors banks too.
The central government banks own 50% in all branches of RRBs, while state governments own 15 % and 35 % stake owned by sponsor banks in these lenders. As per the RRB Act, the combined stake of the central government and the sponsor banks cannot be considered below 51%.
SBI take this move just months after it took over 5 associate banks and the Bharatiya Mahila Bank(BMB). Khara further said that “Those banks who were in the same commercial lending business carried on by SBI. But RRBs are different and they also have a great franchise & deposit base. If differentiated banks can be able to get good interest from the market then there is wonderful space for lenders like RRBs too.”
He was also referring to Equitas Holdings, Ujjivan Financial Services, and AU Small Finance Bank, which successfully made fantastic debuts on the stock market in 2017 after receiving RBI licenses two years ago. Khara told that “If such type of limited license banks can get good valuations, so we are pretty much confident that RRBs who are full-service lenders will also be rewarded. The listing will ensure that they are on their own & improve corporate governance as well.”