The Hindu Business Line : Regional rural banks

This refers to the article "Will RRB mergers lead to efficient rural lending?" (Business Line, September 23). The amalgamation of RRBs (Regional Rural Banks) will not automatically improve efficiency. But it will enlarge their area of operation and business opportunities.

The low credit-deposit ratio of less than 50 per cent is also a cause for low profitability of RRBs. Apart from the problem of high transaction cost, the problem of "lazy banking" tendencies has also afflicted the RRBs. This forces most of them to deposit their surpluses with the sponsor bank, which fetches lower returns in a declining interest rate regime.

As rightly pointed out in the article, there has to be a change in the mindset of the employees and the management. As long as the top management posts are reserved for the officials from sponsor banks, motivation will prove elusive.

Thirty years is a fairly long period to open up the top management slots to the staff of RRBs.

R. H. Sarma

Mumbai

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