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Regional Rural Banks (RRBs) are likely to see a fourth round of amalgamation, with the number of these Banks likely to come down from 43 to 28 through consolidation.
The proposed move is part of the Government’s ‘One State-One RRB’ goal.
As part of the amalgamation exercise, 27 RRBs spread across 12 states may be consolidated into 12 RRBs, going by the State-wise list of RRBs proposed for amalgamation drawn up by the finance ministry.
The ministry has sought comments from the chiefs of sponsor banks of RRBs.
RRBs were established in 1975 under the provisions of an Ordinance promulgated on 26th September 1975 and followed by Regional Rural Banks Act, 1976, with a view to develop the rural economy and create a supplementary channel to the ‘Cooperative Credit Structure’.
They were floated to enlarge institutional credit for the rural and agriculture sector
The contribution of the Government of India, the concerned State Government and the bank (usually a public sector bank), which has sponsored the RRB, to the share capital of RRBs is in the proportion of 50 per cent, 15 per cent and 35 per cent, respectively
Among states/ union territories that will see consolidation of RRBs include Andhra Pradesh, which has the maximum number of RRBs (4), Uttar Pradesh and West Bengal (3 each), and Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan (2 each).
In the case of Telangana, the amalgamation/ merger of RRBs will be subject to bifiurcation of assets and liabilities of Andhra Pradesh Grameena Vikas Bank (APGVB) between APGVB and Telangana Grameena Bank.
With a view to enable RRBs to minimize their overhead expenses, optimize the use of technology, enhance the capital base and area of operation and increase their exposure, the Govemment initiated structural consolidation of RRBs in 2004-05. This resulted in reduction in the number of RRBs from 196 to 43 till 2020-21 through 3 phases of amalgamation.
As per the guiding principles for the proposed amalgamation, the RRB with the largest business (deposits plus advances) among the amalgamating RRBs in a state would be the transferee RRB in that state.
Further, the sponsor bank of the transferee RRB, which has the largest business volume and branch network among all the amalgamating RRBs, would become the sponsor bank of the amalgamated RRB.
A common syntax <Name of the State> <Rajya/Rashtra (as the state is in local language)> <Gramin (in local language)> <Bank> may be adopted while deciding the new name of the RRB.
As at March-end 2023, RRBs had 21,995 branches, 30.6 crore deposit accounts and 2.9 crore loan accounts in 26 States and 3 Union Territories (Puducherry, Jammu and Kashmir and Ladakh), per RBI data.
The 43 RRBs collectively had deposits, advances (net) and investments aggregating ₹6,08,509 crore, ₹3,86,951 crore and ₹3,13,401 crore, respectively.
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