Central Government / These 15 banks are going to be merged, what will be the impact on your accounts?

Central Government: The Finance Ministry has started the fourth phase of consolidation of Regional Rural Banks (RRBs), which is likely to result in the number of RRBs in the country coming down from 43 to 28. According to a blueprint released by the ministry, 15 regional rural banks will be merged in different states in this phase. The aim of this initiative is to realize the policy of "one state-one bank", which can increase the efficiency of RRBs and reduce their costs.

In which states will the mergers take place?

The effect of the merger will be seen in many states. Andhra Pradesh has the highest number of four RRBs, which are proposed to be merged. Similarly, three each in Uttar Pradesh and West Bengal and two each in Bihar, Gujarat, Jammu and Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha, and Rajasthan will be consolidated. In the case of Telangana, the assets and liabilities of regional rural banks are planned to be divided between Andhra Pradesh Gramin Vikash Bank (APGVB) and Telangana Gramin Bank.

The aim of "One State-One RRB"

The letter issued by the Department of Financial Services to the heads of public sector banks said that the aim of merger of Regional Rural Banks is to maintain only one RRB in a state in view of the rural expansion and agro-climatic adaptability of these banks. Through this strategy of "One State-One RRB", it is planned to bring uniformity in the functions of various RRBs and take advantage of their cost reduction.

Reduction in the number of banks from 43 to 28

The Finance Ministry has sought suggestions and comments from the concerned sponsor banks by November 20 under this merger proposal prepared in consultation with NABARD. The central government had initiated the consolidation of RRBs in 2004-05, and during its three phases the number of these banks was reduced from 196 to 43. Now in this fourth phase, the ministry aims to further reduce this number to 28.

History of RRBs and government stake

RRBs were established in 1976 under the RRB Act. The main objective of these banks is to provide loans and other facilities to small farmers, agricultural laborers and artisans in rural areas. In 2015, this Act was amended to allow these banks to raise capital from sources other than the Center and the State. Currently, the Center has a 50% stake in RRB, while 35% stake is with the sponsor banks and 15% with the state governments.

Possible benefits from consolidation

This fourth phase of merger of RRBs by the Finance Ministry is an important step towards making the rural financial structure of the country more robust. This consolidation is expected to improve the operations of various regional rural banks, optimal use of their resources, and increase the availability of services in rural areas.

After this merger, the possibilities of improvement in the efficiency of these banks will become stronger, which will provide more efficient and quick financial services to small farmers and rural entrepreneurs.