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September 28, 2018

Govt to Merge Regional Rural Banks (RRBs) - 56 to 36

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After plans of merging Dena Bank - Vijaya Bank Bank - Baroda (BoB) and Andhra Bank - Oriental Bank of Commerce (OBC) - Punjab National Bank (PNB) as single banking entities, the government is now eying on Regionnal Rural Banks (RRBs). It has already started consolidation of Regional Rural Banks and planning to bring down their number to 36 from the existing 56.

In this regard, the government has begun consultations with various states as they are one of the sponsors of the regional rural banks (RRBs) in the country. Besides, sponsor banks are also preparing road map for the amalgamation of RRBs within a state.

The proposed consolidation of RRBs and bringing down their number from the existing 56 to 36 will lead to better scale-efficiency, higher productivity, robust financial health of such banks, improved financial inclusion and greater credit flow to rural areas, the govt said.

This move will also enable RRBs to minimise their overhead expenses, optimise the use of technology, enhance the capital base and area of operation.

Important Points to Note About Regional Rural Banks (RRBs) :

Regional Rural Banks (RRBs) banks were formed under the RRB Act, 1976, with an objective to provide credit and other facilities to small farmers, agricultural labourers and artisans in rural areas.

The Act was amended in 2015 whereby such banks were permitted to raise capital from sources other than the Centre, states and sponsor banks. Currently, the Centre holds 50 per cent in RRBs, while 35 per cent and 15 per cent are with the concerned sponsor banks and state governments, respectively. In order to improve the financial health of RRBs, the government initiated consolidation of RRBs in a phased manner in 2005.

The number of RRBs came down to 133 in 2006 from 196 at the end of March 2005. It further came down to 105 and subsequently to 82 at the end of March 2012. Further consolidation brought down number of such banks to 56. Now again the govt is going to make them 36.

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