Centre to roll out ‘One state, One RRB’ plan; 43 rural banks to be merged into 28

New Delhi, Apr 7:  The centre is set to implement the ‘One State – One RRB’ plan to achieve operational efficiency and cost rationalisation and consolidation of 43 regional rural banks (RRBs) to 28.

Reportedly, most of the groundwork for the consolidation process has already been completed, and the fourth phase of amalgamation will begin shortly. As part of the roadmap prepared by the Finance Ministry, 15 RRBs operating in various states will be merged.

States that will undergo consolidation include Andhra Pradesh (which currently has 4 RRBs), Uttar Pradesh and West Bengal (3 each), and Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha, and Rajasthan (2 each).

In the case of Telangana, sources said, the issue related to the bifurcation of assets and liabilities of Andhra Pradesh Grameena Vikas Bank (APGVB) between APGVB and Telangana Grameena Bank has concluded. As a precursor to consolidation, the capital infusion was done in these RRBs.

The financial year 2021-22 was a watershed year in the context of RRBs, as the Centre decided to infuse Rs 5,445 crore as its share over a period of two years to facilitate growth capital.

This has led to a remarkable improvement in their performance. In 2023–24, RRBs recorded their highest-ever consolidated net profit of Rs 7,571 crore.

Their capital adequacy ratio also peaked at 14.2% as of March 31, 2024. Additionally, the gross non-performing assets (GNPA) dropped to 6.1%—the lowest in the past decade.

The structural consolidation of RRBs began in 2004–05, reducing the number of such banks from 196 to 43 by 2020–21 through three phases of mergers. Established under the RRB Act of 1976, these banks aim to provide financial support to small farmers, agricultural labourers, and rural artisans.

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 a 50 per cent stake in RRBs, while 35 per cent and 15 per cent are with the concerned sponsor banks and state governments, respectively.

Even after potential dilution, the combined stake of the Centre and sponsor public sector banks must remain above 51%.

As of March 31, 2024, 43 RRBs operate through 22,069 branches across 26 states and 3 Union Territories—Puducherry, Jammu & Kashmir, and Ladakh—covering 700 districts. Many of these banks have also stepped up their adoption of digital banking services, marking a new era of modernisation in rural banking.

With inputs from news agency