One Regional Rural Bank Per State: Modi Government Mulls Merging RRBs To Reduce Number To 28 In Nationwide Consolidation Drive

The Central government is planning to merge regional rural banks, bringing their count down from 43 to 28, news agency Reuters reported citing a government document dated 4 November.

This consolidation is intended to help these banks cut operational expenses and shore up their capital base.

These rural banks primarily serve small-scale farmers, agricultural workers, and businesses in rural areas.

However, they have faced persistent challenges due to inadequate access to capital and technology.

Together, the regional rural banks held deposits totalling Rs 6.6 trillion ($78.46 billion) and and advances of 4.7 trillion rupees as of 31 March, 2024.

According to a banker cited in the Reuters report, the planned mergers would result in a single regional rural bank operating in each state.

Government-owned banks still control more than half of India's banking sector in terms of assets.

Prime Minister Narendra Modi led Central government has tried to consolidate such lenders to improve efficiency and reduce their reliance on government capital infusions.

Ownership of regional rural banks in India is split among stakeholders, with the Central government holding a 50 per cent share, sponsor or scheduled banks owning 35 per cent, and state governments holding the remaining 15 per cent.

India began the consolidation of regional rural banks in 2004-05, which gradually decreased their number from 196 to 43 by the 2020-21 fiscal year.

The latest proposal includes merging two regional banks in the poll-bound western state of Maharashtra and four lenders in Andhra Pradesh, among others, the document showed.

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