- Why in news
- On 5 May 2026, the Department of Financial Services (DFS) approved Viability Plan 2.0 for Regional Rural Banks, covering 2025-26 to 2027-28.
- What it is
- Regional Rural Banks are scheduled commercial banks set up to give credit to small and marginal farmers, artisans and rural workers. The Viability Plan is a DFS framework that sets performance targets and tracks RRBs on them. The first plan ran from FY 2021-22 to FY 2024-25.
- Parameters and pillars
- The plan uses 30 performance parameters under four pillars: operational excellence, asset quality, profitability and growth.
- Key metrics
- Metrics include CRAR, credit-deposit ratio, digital adoption, NPA levels, recovery, profitability ratios and implementation of Government of India schemes.
- Coverage
- The plan applies to all 28 RRBs.
- Legal basis
- RRBs were set up under the Regional Rural Banks Act, 1976, on the recommendation of the Narasimham Working Group.
- Ownership
- The share capital of an RRB is held by the Centre (50%), the sponsor bank (35%) and the state government (15%).
Don’t confuse with CRAR vs credit-deposit ratio: CRAR is capital held against risk-weighted assets, a measure of solvency. The credit-deposit ratio is loans given as a share of deposits, a measure of lending.
Don’t confuse with RRBs vs cooperative banks: RRBs are set up under the RRB Act, 1976, and sponsored by a commercial bank. Cooperative banks are set up under state or multi-state cooperative laws.
Economy terms and data: 42 Prelims questions since 2013, rising in recent years; they test what a term or instrument means. In Mains, 12 news-triggered questions.
Why it matters
- Regular monitoring on common parameters can improve the financial health of rural credit institutions.
- Linking the plan to scheme delivery and digital adoption supports financial inclusion.
Problems
- Many RRBs have a limited capital base and a high share of priority-sector loans, which constrains profitability.
- Weak recovery and NPAs in agriculture lending can undermine the targets.
Way forward
- Continue recapitalisation and consolidation where needed, along with better technology and governance.
- Tie support to performance on the plan's metrics.
- 2014Mains GS3 · Q4Discuss rural credit beyond cooperatives; agri-finance constraints and technology's role in reaching rural clients.
- 2013Prelims Q100Which of RRBs, NABARD, and Land Development Banks grant direct credit to rural households?
- 2020Prelims Q59Do DCCBs deliver more short-term agri credit than SCBs and RRBs?
- 2010Prelims Q138Which statements about bank nationalisation, RRB formation, and village adoption are correct?
UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
No practice question for this one; the card may still help an answer. Why: Lasting banking reform for RRBs; framework facts are few and UPSC rarely asks plan details.
Worth revising until Prelims 2027: most news questions come within two years of the event.