Government Set to merge 56 RRB’s to 36 RRB’s

Government Set to merge 56 RRB’s to 36 RRB’s

After the amalgamation of 3 national banks i.e. Bank of Baroda, Dena Bank and Vijaya Bank, government is mulling to RRB merger in the country from present 56 RRB’s to 36 or 38. and decision on the same will be taken soon.

What are regional Rural Banks? 

Regional Rural Banks are scheduled banks which provide banking services at a regional level in different states of India and are formed under RRB Act 1976. Government of India allot one or more district of a state to regional rural bank in which they operate. Regional Rural banks are sponsored by a Nationalized bank, which is also known as a sponsor bank and is responsible to see the functioning of a regional rural bank. Chairman of all Regional Rural Banks come from the Sponsor bank. Proposition of Shares held in Regional Rural banks are as under

Government of India – 50%
Sponsor Bank – 35%
State Government – 15%

Regional Rural banks were established for financial inclusion in rural India.

Why Government want to merge Regional Rural Banks?

Merger of Regional Rural Banks has been a ongoing process. From 196 RRB’s in year 2005 we had slowly merged them to 56 RRB’s as on 31.03.2014. Still many states have multiple RRB’s operating in one state. In a big state like Uttar Pradesh a total of 7 RRB’s are still operational. Further Merging RRB’s will usher in better scale-efficiency, higher productivity, robust financial health of such banks, improved financial inclusion and greater credit flow to rural areas. This would also help in minimizing expenses, enhance capital, increase area of operation, and optimize use of technology.

One more reason to the same can be 

Supreme Court by an order in April 2018 had asked to implement NPS and pension scheme in all RRB’s and had said to implement it within 3 months time. This might be a reason for amalgamation of Regional Rural Banks as this would help in increasing the capital base of the banks and they would be able to bear the burden of pension and NPS and pay arrears accordingly.

Current Coverage of Regional Rural banks

Regional Rural Banks together have a very large network. They have over 22000 branches spread across India and hold total business in tunes of 10 Lac crores. Total collective profit earned by RRB’s in year 2016-17 was 2950 cr.

Proposed Merger of Regional Rural banks

A few states states are proposed to have 2 RRB’s and rest all states will have 1 RRB. The strongest bank will take over the weaker ones and the sponsor bank will be that of the strongest bank. Proposed number of RRB in a state after amalgamation will be as under.

BOB Vijaya Bank Dena Bank Merger Effects

Condition of employees in PSU Banks