Impact of Direct and Indirect Tax Reforms on the Financial Performance of Regional Rural Banks in Western India
Publication Date : 10-03-2026
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This paper examines the impact of direct and indirect tax reforms on the financial performance of Regional Rural Banks (RRBs) in Western India, with a focus on Maharashtra and Gujarat. Using secondary data from government releases, banking sector reports, and recent policy developments between FY2020–FY2026, the study evaluates profitability, asset quality, credit-deposit ratio, and capital adequacy trends. Major reforms considered include Goods and Services Tax (GST) rationalization, corporate tax changes, interest rate adjustments, and structural consolidation under the “One State One RRB” policy. The findings suggest that indirect tax reforms, particularly GST rate rationalization in 2025, stimulated credit demand, while direct tax rationalization improved capital formation and deposit growth. Structural consolidation and regulatory oversight strengthened operational efficiency and reduced NPAs. However, revenue uncertainties and interest rate transmission posed margin pressures. The study concludes that tax reforms have had a positive but moderated impact on RRB financial performance in Western India.
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