The Centre’s one state-one Regional Rural Bank (RRB) policy came into effect on Thursday, leading to a reduction in the number of RRBs across states/union territories from 43 to 28. The consolidation is intended to achieve better operational efficiency and cost rationalisation.

Post amalgamation, the 28 RRBs in 26 states and 2 union territories with more than 22,000 branches covering 700 districts.

“Amalgamation will enable RRBs to offer enhanced digital services to the customers of RRBs, resulting in improved customer services and product offering through digital channels in rural and semi-urban areas,” finance ministry said in a post on ‘X’.

Amalgamation will result in increased capital base of unified RRBs, spurring credit growth and diversification in line with respective state specific goals, the ministry noted. “(This is a) significant step toward strong RRBs, better governance, improved credit flow and financial inclusion,” it said.

As per a recent gazette notification, RRBs in 11 states — Andhra Pradesh, Uttar Pradesh, West Bengal, Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan — are to be merged into one entity, respectively, for each of these to realise the goal of one RRB per state.

ALSO READ

This is the fourth phase of amalgamation. In the previous three phases viz. phase-I (FY06 to FY10) number of RRBs were reduced from 196 to 82, phase-2 (FY13 –15) number of RRBs were reduced from 82 to 56 and phase-3 (FY19 to FY21) number of RRBs were reduced from 56 to 43.

As per the notification, in line with the powers granted under Section 23A(1) of the Regional Rural Banks Act, 1976, these RRBs will merge into a single entity in the public interest and in the interest of the development of the area served by these entities and also in the interest of the RRBs themselves.

RRBs play a crucial supporting role in the rural economy. About 70% of Regional Rural Banks credit flows through agricultural sector, 64% is targeted towards weaker sections including small and marginal farmers. As of March 31, 2024, RRBs together had deposits worth Rs 6.6 lakh crore or 3.2% share of all bank deposits. The RRBs share in advances was Rs 4.7 lakh crore or 2.9% of all bank advances.

RRBs have recorded the highest ever consolidated net profit of Rs 7,571 crore in FY 2023-24. The shareholding pattern of RRBs is Centre 50%, sponsor banks 35%, and states 15%.