Description

The Indian government has declared the consolidation of several Regional Rural Banks (RRBs), set to take effect from May 1, 2025. This strategic move is aligned with the ‘One State, One RRB’ policy introduced by the Ministry of Finance in September 2024, aiming to enhance operational efficiency and reduce intra-sector competition among public sector banks.

Objective Of Consolidation

The core aim of this restructuring is to form stronger and larger RRBs that are better equipped to cater to rural needs. Merging smaller entities is expected to improve service delivery, strengthen financial foundations, and streamline administration.

State-Wise Amalgamation Details

• Andhra Pradesh: Chaitanya Godavari Grameena Bank, Andhra Pragathi Grameena Bank, Saptagiri Grameena Bank, and Andhra Pradesh Grameena Vikas Bank will unify.

• Bihar: Dakshin Bihar Gramin Bank and Uttar Bihar Gramin Bank will merge into Bihar Gramin Bank.

• Gujarat: Baroda Gujarat Gramin Bank and Saurashtra Gramin Bank will become Gujarat Gramin Bank.

• Jammu & Kashmir: J&K Grameen Bank and Ellaquai Dehati Bank will integrate into Jammu and Kashmir Grameen Bank.

• Karnataka: Karnataka Vikas Grameena Bank and Karnataka Gramin Bank will form Karnataka Grameena Bank.

• Madhya Pradesh: Madhya Pradesh Gramin Bank and Madhyanchal Gramin Bank will combine.

• Maharashtra: Maharashtra Gramin Bank and Vidarbha Konkan Gramin Bank will merge under the name Maharashtra Gramin Bank.

• Odisha: Odisha Gramya Bank and Utkal Grameen Bank will consolidate into Odisha Grameen Bank.

• Rajasthan: Rajasthan Marudhara Gramin Bank and Baroda Rajasthan Kshetriya Gramin Bank will become Rajasthan Gramin Bank.

• Uttar Pradesh: Baroda UP Bank, Aryavart Bank, and Prathama UP Gramin Bank will unite into Uttar Pradesh Gramin Bank.

• West Bengal: Bangiya Gramin Vikash Bank, Paschim Banga Gramin Bank, and Uttarbanga Kshetriya Gramin Bank will join to form West Bengal Gramin Bank.

RRBs’ Financial Standing

In FY2023-24, RRBs reported a record-breaking net profit of ?7,571 crore, while maintaining a gross NPA ratio of 6.1%—the lowest in over ten years. These robust financial indicators set a positive tone for the consolidation's future impact.

Sponsoring Banks Role

Each newly formed RRB will continue to operate under the sponsorship of a leading public sector bank, ensuring stability and strategic direction. Among the sponsors:

• State Bank of India (SBI) is the largest contributor.

• Followed by Punjab National Bank (PNB) and Canara Bank.

Key Information About RRBs

• RRBs were established in 1975, based on the Narasimham Committee’s recommendations on rural credit.

• This led to the enactment of the Regional Rural Banks Act, 1976.

• The first RRB, Prathama Grameen Bank, was set up on October 2, 1975, with Syndicate Bank as its sponsor.

• Ownership of RRBs is shared in a tripartite model: 50% – Central Government, 35% – Sponsor Banks, 15% – State Governments

Functions And Services Offered By RRBs

• Deliver core banking services to rural and semi-urban regions.

• Support key government schemes by: Disbursing MGNREGA wages, Managing pension distributions

• Provide para-banking facilities, including: Safe deposit lockers, Debit and credit cards, Mobile and internet banking, UPI transactions

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