In an effort to streamline operations and rationalize costs, the Ministry of Finance has launched the fourth round of consolidation of Regional Rural Banks (RRBs). As a result, the number of RRBs should be reduced from the current 43 to 28.

According to the roadmap drawn up by the Finance Ministry, 15 RRBs spread across different states will be merged. States affected by consolidation include Andhra Pradesh, which has the highest number of RRBs (4), followed by Uttar Pradesh and West Bengal (3 each). Other states such as Bihar, Gujarat, Jammu and Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan will see the merger of two RRBs each.

In Telangana, consolidation will depend on the bifurcation of assets and liabilities between Andhra Pradesh Grameena Vikas Bank (APGVB) and Telangana Grameena Bank.

“Given the rural expansion of RRBs and the agro-climatic or geographical ethos and to retain the USP of RRBs, namely proximity to communities, it is necessary to embark on further consolidation of RRBs towards the “One State, One RRB” objective. to benefit from scale efficiency and cost rationalization,” the Department of Financial Services said in a communication to the state-owned banks chief, PTI reported.

A roadmap for further consolidation has been developed in consultation with NABARD, aiming to reduce the number of RRBs from 43 to 28, the statement said.

The Department of Financial Services has requested feedback from executives of RRB sponsor banks by November 20. The center started structural consolidation of RRBs in 2004-05, reducing the number of these institutions from 196 to 43 by 2020-21 in three phases. fusion.

These banks were established under the RRB Act, 1976 to provide credit and other financial services to small farmers, agricultural laborers and artisans in rural areas. In 2015, the law was amended to allow RRBs to raise capital from sources other than the centre, state governments and sponsor banks.

Currently, the Center holds a 50 percent stake in the RRBs, while the remaining 50 percent is divided between sponsor banks (35 percent) and state governments (15 percent). However, even after dilution of stakes, the combined stake of the Center and sponsoring public sector banks must remain above 51 per cent, as per the amended law.

Earlier in June, two major banking unions – the All India Bank Officers’ Confederation (AIBOC) and the All India Bank Employees Association (AIBEA) – called for the merger of RRBs with their respective sponsor banks to improve efficiency and overall viability of the system. banking sector. Unions have argued that such a merger would ensure a smooth technological transition, a view expressed in a letter sent to Finance Minister Nirmala Sitharaman.

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