Govt Eyes Fourth Amalgamation Of RRBs, Aiming To Reduce From 43 To 28
Plan for 'One State-One RRB' set to reshape india's regional banking landscape with new consolidations
The Government is likely to implement a fourth round of consolidation for Regional Rural Banks (RRBs), reducing their count from 43 to 28 as part of its ‘One State-One RRB’ policy. Under this plan, 27 RRBs across 12 states may be merged into 12 entities, according to a state-wise list of RRBs marked for amalgamation by the finance ministry. The chiefs of sponsor banks for these RRBs have been invited to share their views on the proposal.
RRBs, established in 1975 under the Regional Rural Banks Act, were designed to support rural economies by extending institutional credit to the agricultural and rural sectors. Funding for RRBs comes from the Government of India (50 per cent), respective state governments (15 per cent), and the sponsoring public sector banks (35 per cent).
The latest round of consolidation will affect states and union territories such as Andhra Pradesh, with four RRBs, Uttar Pradesh and West Bengal (three each), and Bihar, Gujarat, Jammu and Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha, and Rajasthan (two each). In Telangana, the proposed merger will require bifurcating assets and liabilities of Andhra Pradesh Grameena Vikas Bank between Andhra Pradesh and Telangana Grameena Bank.
Since 2004-05, the Government has driven three rounds of RRB consolidation, reducing their number from 196 to 43 by 2020-21. The aim is to help RRBs reduce overhead costs, improve technology adoption, expand capital bases, and enhance operational coverage. Following the new guidelines, the RRB with the largest business volume among merged entities in each state will become the primary RRB, and its sponsor bank will assume sponsorship of the new RRB. A unified naming format will be adopted, using the local state name followed by “Rajya/Rashtra Gramin Bank.”
As of March 2023, RRBs operate 21,995 branches across 26 states and 3 union territories, including Jammu & Kashmir, Ladakh, and Puducherry, serving 30.6 crore deposit accounts and 2.9 crore loan accounts. According to the Reserve Bank of India, RRBs held aggregate deposits, advances, and investments of Rs 6.08 Lakh Crore, Rs 3.86 Lakh Crore, and Rs 3.13 Lakh Crore, respectively.
