The Central government’s proposed move to bring down the number of Regional Rural Banks (RRBs) from 56 to 38 via amalgamation will create umpteen problems for rural people and hamper efforts to provide better banking services to them, according to the All India RRB Officers Federation.

SK Bhattacharjee, General Secretary, said it is the federation’s firm belief that the intrinsic problems bedeviling the organic growth and consolidation of RRBs can best be resolved once and for all by merging them with commercial (sponsor) banks.

RRBs are jointly owned by the Central government, the State government concerned and the sponsor (usually public sector) bank, with the issued capital shared in the proportion of 50 per cent, 15 per cent and 35 per cent. These banks were set up under the Regional Rural Banks Act, 1976, with a view to develop agriculture, trade, commerce, industry and other productive activities in the rural areas by providing credit and other facilities, particularly to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs.

“After a prolonged period of disruption and turmoil in the rural economy when there appears to be some visible signs of stabilisation and growth, this move to further amalgamate the existing RRBs will not only prove to be disruptive but also serve no material or useful purpose. The move will, therefore, be regressive at this juncture,” said Bhattacharjee.

According to the Department of Financial Services, structural consolidation of RRBs, under Phase 1, was initiated in 2004-05 by amalgamating RRBs of the same sponsor bank within a State. The number of RRBs, as a result, got reduced to 82 from 196.

The further process of amalgamation was initiated in 2011-12, under phase 2, by amalgamating RRBs with geographically contiguous areas of operations within a state, across sponsor banks. Till 2014-15, the number of RRBs was brought down from 82 to 56.

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