A major development has surfaced concerning the merger of banks nationwide. The Ministry of Finance has reportedly begun the fourth phase of consolidating Regional Rural Banks (RRBs), which could reduce their number from 43 to 28. The Ministry’s blueprint proposes merging 15 regional rural banks across multiple states.
Merger of 15 Banks
The consolidation of RRBs will cover Andhra Pradesh, which has the highest count with four RRBs, along with Uttar Pradesh, West Bengal, Bihar, Gujarat, Jammu and Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha, and Rajasthan. In Telangana, the merger process will proceed by dividing the assets and liabilities of the Andhra Pradesh Grameena Vikas Bank (APGVB).
One State, One RRB
In a letter to public sector bank heads, the Financial Services Department emphasized the need to further consolidate regional rural banks, given their geographical and agricultural focus. This consolidation is intended to strengthen their community connections, enhance operational efficiency, and improve profitability.
Reducing Bank Numbers from 43 to 28
The statement noted that a merger blueprint was crafted in collaboration with the National Bank for Agriculture and Rural Development (NABARD), aiming to reduce the number of RRBs from 43 to 28. The Financial Services Department has requested feedback from the heads of sponsoring banks for regional rural banks by November 20. Notably, the government began restructuring RRBs in 2004-05, which has already reduced their count from 196 to 43 by 2020-21 across three consolidation phases.
Government’s 50% Stake
Established under the RRB Act of 1976, these banks aim to provide loans and other services to small farmers, agricultural laborers, and artisans in rural areas. The Act was amended in 2015, permitting RRBs to raise capital beyond central, state, and sponsoring bank sources. Currently, the central government holds a 50% stake in RRBs, with sponsoring banks holding 35% and state governments 15%.