New Delhi: The Ministry of Finance is set to roll out the ‘One State-One RRB’ strategy to improve operational efficiency and reduce costs that which will bring down the number of Regional Rural Banks (RRBs) from 43 to 28.
According to reports, most of the groundwork for the fourth phase of consolidation has been completed, and the process is expected to begin shortly.
Under the proposed roadmap for One State-One RRB, 15 RRBs functioning across various states will be amalgamated. States such as Andhra Pradesh, currently hosting the highest number of RRBs at four, will undergo significant restructuring. Other states identified for consolidation include Uttar Pradesh and West Bengal (three RRBs each).
At the same time, Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan, each with two RRBs, will also see mergers.
In Telangana, the long-pending issue of bifurcating the assets and liabilities of Andhra Pradesh Grameena Vikas Bank (APGVB) with Telangana Grameena Bank has reportedly been resolved, paving the way for further integration.
The Centre had initiated the structural consolidation of RRBs in 2004-05, reducing their number from 196 to 43 over three phases.
These banks, originally established under the RRB Act of 1976 to support rural credit for small farmers, artisans and agricultural workers, underwent a significant transformation after the Act was amended in 2015 to allow capital mobilisation from non-government sources.
Despite the amendment, the combined stake of the Centre and sponsoring public sector banks is legally required to remain above 51 per cent.
In preparation for this fresh round of consolidation, capital support was extended to the RRBs, with the government infusing Rs 5,445 crore over two years beginning FY 2021-22. This financial backing contributed to a strong performance in FY 2023-24, when RRBs recorded a record-high consolidated net profit of Rs 7,571 crore.
Their capital adequacy ratio also peaked at 14.2 per cent, while gross non-performing assets (GNPA) fell to a 10-year low of 6.1 per cent.
Currently, the 43 RRBs operate through 22,069 branches across 26 states and three Union Territories, Puducherry, Jammu & Kashmir and Ladakh, reaching over 700 districts.
Discussion about this post