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The Finance Ministry is considering a proposal to further consolidate the number of Regional Rural Banks (RRBs) to 55 for improving their efficiency and to better serve the rural economy.
There are 82 RRBs sponsored by various public sector banks across the country.
“We are looking at further amalgamation of RRBs to 50-55 so that their efficiencies can be improved and they achieve scale. They can thus better serve the rural economy,” official sources said.
Such amalgamation will also help in optimising the use of modern technology, the sources said.
RRBs have a network of about 16,000 branches spread across the rural and semi-urban centres of the country.
Consolidation of RRBs has been going on in a phased manner since 2005. The number of RRBs came down to 133 in 2006 from 196 at the end of March 2005. It further came down to 105 and subsequently to 82 at the end of March 2012.
As part of the earlier consolidation process, RRBs sponsored by one public sector bank within a state were amalgamated.
This time, two or three rural banks sponsored by different commercial banks within a state can also be amalgamated into a new entity, which will come under the fold of one of the sponsor banks involved.
Of the total, 75 RRBs were profit-making while the remaining seven had registered losses at the end of March 2011.
In order to boost the capital base of RRBs, the Government on the recommendation of a panel headed by RBI Deputy Governor K.C. Chakrabarty decided to recapitalise 40 selected RRBs in 21 states.
As per approved scheme, the release of Central Government share was subject to proportionate share by the Central Government, concerned sponsor banks and State Government.
The Central Government holds 50 per cent in RRBs while 35 per cent and 15 per cent are with concerned sponsor banks and State Government, respectively.
During 2010-11, a sum of Rs 66.49 crore was released to 5 RRBs as part of recapitalisation.
The Government has extended the scheme of capitalisation of weak RRBs by another two years to enable all the states to contribute their share.
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