The Finance Ministry is ready to implement “One State-One RRB” in which 15 Regional Rural Banks (RRBs) operating in various states will be merged. The government is planning to merge 43 RRBs into 28 to improve efficiency and reduce costs of the banks. Preparation is almost done and the fourth phase of
consolidation will start soon.
States that will be affected by this plan are:
Andhra Pradesh – 4 RRBs will be merged into 1 RRB.
Uttar Pradesh and West Bengal – 3 RRBs will be merged into 1 RRB.
Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha, Rajasthan – 2 RRBs from each state will be merged into 1 RRB.
Benefits of implementing “One State-One RRB”
– Government expenses to manage multiple banks costs will be cut down.
– It will make the bank’s day-to-day activity more organized and effective and will lead to better performance.
– Consolidation will make banks create stronger institutions. Banks will be more powerful, stable, and capable of handling more businesses.
Government initiatives to support RRBs
In the financial year 2021-2022, government invested Rs 5445 crore into RRBs to grow and strengthen their financial position. In a result, RRBs performed exceptionally well in the year 2023-2024. RRBs recorded the highest net profit of Rs 7,571 crore. Capital adequacy reached 14.2%, and Gross Non-Performing Assets (GNPA) dropped to 6.1% which was the lowest in 10 years.
Currently there are 43 RRBs with 22069 branches across 26 states and 3 union territories (Puducherry, Jammu & Kashmir and Ladakh). At present, Government of India is the largest shareholder in the RRBs by holding 50% stake. Sponsor banks like State Bank of India (SBI), Punjab National Bank (PNB), etc,. holds 35% stake. Sponsor banks help RRBs with financial support and management resources. Each state where RRB operates the state government holds 15% stake.
It is important that the combined stake of the government and the sponsor banks should not fall below 51%. This ensures that the control and the decision-making power of the RRBs remain with public sector banks and the Government. It will make RRBs focus more on public interest and rural development rather than profit-driven motives.