'One state-one RRB' to be effective from May 1 after govt approves consolidation of 15 regional rural banks

'One state-one RRB': One state-one RRB will become a reality from next month as the finance ministry has issued notification for the consolidation of 15 Regional Rural Banks across 11 states to achieve better operational efficiency and cost rationalisation. With this fourth round of consolidation of regional rural banks (RRBs), the number would reduce to 28 from the existing 43.

As per the 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 state-one RRB'.

The effective date for amalgamation has been fixed to May 1, as per the gazette notification dated April 5, 2026. 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 and also in the interest of RRBs themselves.

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RRBs functioning in India

For example, Chaitanya Godavari Grameena Bank, Andhra Pragathi Grameena Bank, Saptagiri Grameena Bank and Andhra Pradesh Grameena Vikas Bank sponsored by Union Bank of India, Canara Bank, Indian Bank and State Bank of India amalgamated into a single RRB called as Andhra Pradesh Grameena Bank.

The head office of the new entity would be at Amravati and the RRB would be under sponsorship of Union Bank of India, it said. In the case of Uttar Pradesh and West Bengal, three RRBs to be merged into one in each of these states.

As far as Uttar Pradesh is concerned, Baroda UP Bank, Aryavart Bank and Prathama UP Gramin Bank sponsored by the Bank of Baroda, Bank of India and Punjab National Bank amalgamated into Uttar Pradesh Gramin Bank with its head office at Lucknow under the sponsorship of Bank of Baroda.

In the case of West Bengal, Bangiya Gramin Vikash, Paschim Banga Gramin Bank and Uttarbanga Kshetriya Gramin Bank sponsored by the Punjab National Bank, UCO Bank and Central Bank of India to be amalgamated into West Bengal Gramin Bank.

In eight states -- Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan, two RRBs would be merged into one. Dakshin Bihar Gramin Bank and Uttar Bihar Gramin Bank will be merged into Bihar Gramin Bank under the sponsorship of Punjab National Bank.

With regard to Gujarat, Baroda Gujarat Gramin Bank and Saurashtra Gramin Bank hereby amalgamated into a single Regional Rural Bank, which shall be called Gujarat Gramin Bank with its head office at Vadodara under the sponsorship of Bank of Baroda.

For the Union Territory of Jammu and Kashmir, J & K Grameen Bank and Ellaquai Dehati Bank sponsored by J&K Bank and State Bank of India to be merged into a single RRB called Jammu and Kashmir Grameen Bank with its head office at Jammu under the sponsorship of J&K Bank, it said.

All the entities would have authorised capital of ₹2,000 crore, it added. After consultation with stakeholders, an amalgamation of 26 RRBs in 10 states and 1 UT has been carried out with a primary focus on improvement in scale efficiency and cost rationalisation, the finance ministry said in a statement.

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At present, 43 RRBs are functioning in 26 states and 2 UTs. Post amalgamation, there will be 28 RRBs in 26 states and 2 UTs with over 22,000 branches covering 700 districts. Their predominant area of operation is in rural areas, with approx 92 per cent of branches in rural/semi-urban areas, it said.

This is the fourth phase of amalgamation. In Phase 1 (FY 2006 to FY 2010) number of RRBs was reduced from 196 to 82, it was further brought down from 82 to 56 in Phase 2 (FY 2013 - FY 2015) and in Phase 3, it was cut from 56 to 43.

As a precursor to consolidation, the capital infusion was done in these RRBs. The 2021-22 fiscal was a watershed year in the context of RRBs as the Centre decided to infuse ₹5,445 crore as its share over a period of two years to facilitate growth capital.

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RRBs performance metrics

The performance of RRBs has improved during 2023-24 and has reached historic highs on several parameters. RRBs posted the highest-ever consolidated net profit of ₹7,571 crore during 2023-24 and their consolidated capital adequacy ratio was at an all-time high of 14.2 per cent as of March 31, 2024.

The asset quality measured by GNPA (Gross Non-Performing Assets) at 6.1 per cent was the lowest in the previous 10 years. The Centre had initiated structural consolidation of RRBs in 2004-05, which resulted in a reduction of such institutions from 196 to 43 till 2020-21 through three phases of amalgamation.

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

Currently, the Centre holds a 50 per cent stake in RRBs, while 35 per cent and 15 per cent are with the concerned sponsor banks and state governments. Even after stake dilution, the shareholding of the Centre and the sponsor public sector banks together cannot fall below 51 per cent, according to the amended Act. As of March 31, 2024, 43 RRBs are operating through a network of 22,069 branches in 26 states and three Union Territories (Puducherry, Jammu & Kashmir, Ladakh) covering 700 districts of the country.