Purpose: Regional development banks in Indonesia exhibit much lower financial performance than their private and state-owned counterparts. Researchers intend to investigate the factors responsible for the poor performance of the Regional Development Banks (RDBs) in light of this situation. Theoretical framework - To examine how to improve development bank performance in Indonesia, this study an enhanced Political Risk, Credit Risk, and Product Diversification. Method - The data was obtained from the published financial statements of RDBs in Indonesia. The research was conducted in three stages. In the first stage of the study, in-depth interviews were conducted with banking administrators (Board of Directors - BOD and Board of Commissioners - BOC) from several RDBs in Indonesia to gather initial information related to the banking management process. The second stage involved quantitative research in secondary data analysis using multiple regression analysis techniques. The third stage involved deepening the analysis of findings through another round of qualitative research in the form of Focus Group Discussions (FGDs). Findings – The results show that both political risk and credit risk have significant effects on the financial performance of regional development banks. However, the diversification of products has no substantial impact on financial performance. Moreover, the Capital Adequacy Ratio (CAR) also considerably affects the financial performance of regional development banks. Research limitations/implications This study could be expanded further to identify the optimal product diversification structure for forecasting the financial performance of RDBS in Indonesia. Practical implications – This paper is part of a growing body of literature emphasizing the significant connection between Political Factors, Credit Risk, and Product Diversification with the Performance of Regional Development Banks in Indonesia. This relationship is essential for RDBs to consider when making lending decisions and for local governments to formulate policies to replace RDBS administrators in Indonesia. Originality/value –This research aims to encourage RDBs in Indonesia that face political and credit risks and the need to diversify their products to minimize risks and reinforce their financial stability. Furthermore, this research can serve as valuable input for local governments, facilitating them in reducing their interference in managing RDBs in Indonesia.