Centre moves to consolidate RRBs along with staterun banks

NEW DELHI: The government has also initiated consolidation of regional rural banks along with the public sector lenders and intends to bring down their number to 36 from the existing 56.

In this regard, the Centre has begun consultations with states as they are one of the sponsors of the regional rural banks (RRBs) in the country, a senior finance ministry official has said. Besides, sponsor banks are also preparing road map for the amalgamation of RRBs within a state, the official said.

The development assumes significance in the light of government earlier this month announcing decision to merge Bank of Baroda, Vijaya Bank and Dena Bank to create another global size bank. The proposed consolidation of RRBs and bringing down their tally from the existing 56 to 36 will usher in better scale-efficiency, higher productivity, robust financial health of such banks, improved financial inclusion and greater credit flow to rural areas, the official said. Besides, the move will enable RRBs to minimise their overhead expenses and enhance the capital base, the official added.

RRBs were formed under the RRB Act, 1976, with an objective to provide credit and other facilities to small farmers, agricultural labourers and artisans in rural areas. The Act was amended in 2015 whereby such banks were permitted to raise capital from sources other than the Centre, states and sponsor banks.