FM Sitharaman Reviews Karnataka Grameena Bank, Urges Rural Credit Expansion

In a significant push to strengthen rural banking and financial inclusion, Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman, chaired a high-level review meeting of Karnataka Grameena Bank (KaGB) on 16th October 2025 at Ballari, Karnataka. The meeting was part of the government's ongoing efforts to monitor and guide the performance of regional rural banks in alignment with India's development objectives, particularly in semi-urban and rural sectors.

The session was attended by key stakeholders, including Shri M. Nagaraju, Secretary of the Department of Financial Services (DFS); Shri Shaji K.V., Chairman of NABARD; senior executives from Canara Bank, which is KaGB's sponsor bank; and other officials from the Ministry of Finance and financial institutions.

Performance Indicators Under Review

During the review, the Finance Minister examined the performance of KaGB across several key metrics:

• Credit growth and disbursement trends

• Non-Performing Assets (NPAs)

• Inclusion under key government schemes such as PMJDY, PMJJBY, PMSBY, PMFME, and PM-Vishwakarma

• Progress under financial inclusion initiatives

• Agriculture and MSME sector lending

Smt. Sitharaman emphasized the importance of KaGB increasing its share in ground-level credit for agriculture, with a renewed focus on emerging and allied sectors such as dairy, fisheries, and agro-processing. She called for better alignment with government priorities, stating that rural financial institutions must not only support traditional sectors but also anticipate the changing dynamics of rural demand and economic growth.

Leveraging Rural Growth and GST Reforms

The Finance Minister highlighted that the rationalisation of GST rates has led to a rise in rural consumption, signifying deeper market penetration. This development, she noted, opens up new avenues for credit expansion and micro-enterprise financing. Smt. Sitharaman encouraged KaGB and other rural banks to tap into this opportunity by tailoring financial products and services that match rural consumption and entrepreneurial trends.

Enhancing FPO and MSME Engagement

Addressing the importance of Farmer Producer Organisations (FPOs), the Minister stressed that while some FPOs receive capital support from government departments and Development Financial Institutions, their working capital needs must be met by banks. She advised KaGB to customise banking products for FPOs, which would enable better credit absorption and mutual growth. Additionally, KaGB and Canara Bank were directed to collaborate with the state government to strengthen credit support to MSMEs in underserved areas.

Focus on Emerging Sectors and Technological Integration

The Finance Minister also pointed out the migration of service industries, such as data centres, from Tier-1 to Tier-2 and Tier-3 cities. Rural banks like KaGB, she said, must identify and capitalize on such emerging business ecosystems to strengthen their own financial base. KaGB was urged to work on reviving stressed assets, improving its balance sheet, and making its business operations profitable.

To support long-term sustainability, Smt. Sitharaman advised enhancing operational efficiency through technology adoption, strengthening customer service, and improving asset quality. She further emphasized the need to expand KaGB's footprint in the Kalyan Karnataka region, especially in banking deserts, by opening new branches and extending outreach.

Government Scheme Implementation and Local Partnerships

The Minister specifically directed KaGB and its sponsor Canara Bank to engage closely with panchayat- and district-level committees to enhance the screening and implementation of applications under government-sponsored schemes like PM Vishwakarma and PM Formalisation of Micro Food Processing Enterprises (PMFME).

Institutional Strengthening and Strategic Planning

Shri M. Nagaraju, Secretary (DFS), praised the bank for its successful integration post-amalgamation and urged a review of KaGB's medium-term business plan to ensure long-term sustainability. He stressed the need for closer collaboration between KaGB, NABARD, and other public sector banks to provide holistic banking services in unbanked and underserved regions.

Mr. Nagaraju further emphasized:

• The potential of agro-processing and MSMEs in the region

• Skill upgradation and staff integration in the post-amalgamation era

• The importance of KaGB's future partnerships with PSBs to expand rural outreach

• KaGB's commendable performance in Atal Pension Yojana (APY) and the need to replicate success across other inclusion schemes

Strategic Vision for Rural Banking

The meeting underscored a clear strategic shift toward decentralised, responsive, and innovation-led rural banking. KaGB's ability to serve as a financial catalyst in emerging sectors, from agro-processing to digital services, was at the core of the discussion. The government reiterated its vision for regional rural banks as engines of inclusive development, economic empowerment, and financial resilience.

As rural economies evolve with new opportunities and challenges, the Finance Minister's detailed directives mark a significant milestone in reimagining regional rural banks as growth-enabling institutions deeply embedded in the country's developmental architecture.