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Consolidation in the regional rural banks (RRB) space is gathering steam. RRBs sponsored by Punjab National Bank in Punjab and Bihar have grown bigger with effect from January 1, 2019, following the amalgamation of RRBs sponsored by other public sector banks in these two states with the former.
As part of the state-level consolidation push by the government, two RRBs -- Malwa Gramin Bank (sponsor: State Bank of India) and Sutlej Gramin Bank (Punjab & Sind Bank) -- have been amalgamated with Punjab Gramin Bank (PNB), and Uttar Bihar Gramin Bank (UCO Bank) has been amalgamated with Madhya Bihar Gramin Bank (PNB).
While the consolidated RRB in Punjab is called Punjab Gramin Bank, with headquarters at Kapurthala, the one in Bihar has been rechristened as Dakshin Bihar Gramin, with headquarters at Patna.
PNB is the sponsor of three other RRBs -- Sarva Haryana Gramin Bank, Rohtak (Haryana); Himachal Pradesh Gramin Bank, Mandi (Himachal Pradesh); and Sarva UP Gramin Bank, Meerut (Uttar Pradesh). Following the amalgamation, the number of RRBs in the country has come down from 56 to 53.
Roadmap
To enable RRBs to minimise their overhead expenses, optimise the use of technology, enhance the capital base and area of operation and increase their exposure, the Government has initiated the process of consolidation of RRBs in the country. The National Bank for Agriculture and Rural Development (Nabard) has suggested a road map which proposes to bring down the number of RRBs to 38.
RRBs were established in 1975 with the mandate to bring together the positive features of credit co-operatives and commercial banks in order to address the credit needs of backward sections in rural areas. Of the capital issued by a RRB, 50 per cent is held by the central government, 15 per cent by the concerned state government and 35 per cent by the sponsor bank. They are regulated by the Reserve Bank of India and supervised by Nabard.
Leveraging on a network of 21,747 branches with 56 banks at end-March 2018, and to play a greater role in financial inclusion, the government approved a scheme of recapitalisation of RRBs in 2010- 11, which was extended twice in 2012-13 and 2015-16, according to RBI's Report of Trend and Progress of Banking in India. During 2017-18, the recapitalisation scheme received further extension till 2019-20, with ₹1100 crore provided for RRBs.
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