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Government plans to merge 10 rural banks

In a bid to make Regional Rural Banks (RRB) leaner and more efficient, the Central government is planning to bring down their number from 45 to 35 this financial year. It has also identified three RRBs for public listing.

“The consolidation drive for RRBs will continue. This year, the target is to bring down the number from 45 to 35. We are already working with state governments to complete the consolidation,” a senior official from the National Bank for Agriculture and Rural Development (NABARD) told this publication.

The Centre has already prepared a roadmap for amalgamation of RRBs within a state in consultation with NABARD, which is the regulatory authority for these banks. Once the consolidation is completed, it will list at least three of these RRBs on stock exchanges.

“The government has identified at least three RRBs for listing, which is likely to be done in the current fiscal,” the NABARD official added.

The banks were formed under the Regional Rural Banks 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. Currently, the Centre holds 50 per cent stake in RRBs, the concerned sponsor banks and state governments hold 35 per cent and 15 per cent respectively.

The number of RRBs came down to 133 in 2006 from 196 at the end of March 2005. It further came down to 82 by the end of March 2012 and subsequently to 56. After last year’s consolidation, there were 45 RRBs functioning across India, with a staff strength of around 90,000.

According to the current scheme for recapitalisation of RRBs, the recapitalisation support is provided to them by the Central and concerned state governments, as well as the sponsor banks, in the ratio of 50:15:35, to enable them to meet the regulatory requirement of Capital to Risk-weighted Assets Ratio (CRAR) of 9 per cent.

The Union Budget 2019-20 has provided Rs.235 crore towards recapitalisation of RRBs.

“Time has come that the DCCBs (District Co-operative Central Banks) and RRBs have to generate their capital from the market. For that, it is important that they are trimmed down, consolidated into bigger and better entity. The process is already on,” said the official. NABARD is already preparing a framework to introduce a risk-based supervision for all RRBs and DCCBs.

In times to come, risk-based supervision, which has been extended by RBI to commercial banks, will also be extended to RRBs and DCCBs, said HK Bhanwala, chairman, NABARD.


50% stake in RRBs currently held by the Central government

35% & 15% stakes held by sponsor banks and concerned state governments respectively


Regional Rural Banks were formed under RRB Act, 1976, to provide credit facilities to small farmers, agricultural labourers and artisans.

The Act was amended in 2015 to permit RRBs to raise capital from sources other than the Centre, states and sponsor PSBs.

The amendment stipulates even after stake dilution, shareholding of the Centre and sponsor PSBs together cannot fall below 51%, keeping it under government control.

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