RRB Consolidation: The Finance Ministry has started the fourth phase of merger of Regional Rural Banks (RRBs), which is likely to reduce the number of such banks from the current 43 to 28.
RRB Consolidation: The Finance Ministry has started the fourth phase of merger of Regional Rural Banks (RRBs), which is likely to reduce the number of such banks from the current 43 to 28. According to the blueprint prepared by the Finance Ministry, 15 RRBs will be merged in various states.
These banks will be merged
RRBs will be merged in Andhra Pradesh (which has the highest number of 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 case of Telangana, the merger of regional rural banks will be subject to division of assets and liabilities of Andhra Pradesh Grameena Vikas Bank (APGVB) between APGVB and Telangana Grameena Bank.
What is the detail
The Department of Financial Services said in a letter sent to the heads of public sector banks, “In view of the rural expansion and agro-climatic or geographical nature of regional rural banks and to maintain the special feature of regional rural banks i.e. their proximity to the communities, there is a need to further consolidate the regional rural banks to achieve the goal of ‘one state-one regional rural bank’, so that the benefits of comprehensive efficiency and cost rationalization can be achieved.”
The number of RRBs will be reduced to 28
The statement said that a blueprint has been prepared in consultation with the National Bank for Agriculture and Rural Development (NABARD) for further consolidation, which will reduce the number of RRBs from 43 to 28. The Department of Financial Services has sought comments from the heads of the sponsor banks of Regional Rural Banks by November 20. The Center had initiated structural consolidation of RRBs in 2004-05, which resulted in the number of such institutions coming down from 196 to 43 by 2020-21 through three phases of merger.
Center to have 50 percent stake in RRB
These banks were established under the RRB Act, 1976, with the objective of providing loans and other facilities to small farmers, agricultural laborers and artisans in rural areas. This Act was amended in 2015, under which such banks were allowed to raise capital from sources other than the Center, State and sponsor banks. The Centre currently holds 50 per cent stake in RRBs, while 35 per cent and 15 per cent stake is held by the respective sponsor banks and state governments, respectively.
