The finance ministry will soon implement the ‘One State-One RRB’ plan to achieve operational efficiency and cost rationalisation and consolidation of 43 regional rural banks (RRBs) to 28. Most of the work related to the issue of consolidation have been completed and the fourth round would happen soon, according to sources. As per the roadmap prepared by the finance ministry, 15 RRBs operating in various states would be merged.

Among states that will see consolidation of RRBs include Andhra Pradesh, which has the maximum number of RRBs (4), Uttar Pradesh and West Bengal (3 each), and Bihar, Gujarat, Jammu and Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan (2 each).

In the case of Telangana, sources said, the issue related with bifurcation of assets and liabilities of Andhra Pradesh Grameena Vikas Bank (APGVB) between APGVB and Telangana Grameena Bank have concluded.

As a precursor to consolidation, the capital infusion was done in these RRBs.

The financial year 2021-22 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.

In this backdrop, 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 on 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 reduction of such institutions from 196 to 43 till 2020-21 through 3 phases of amalgamation. These banks were formed under the RRB Act, 1976, with an objective to provide credit and other facilities to small farmers, agricultural labourers and artisans in rural areas.  amended in 2015, whereby such banks were permitted to raise capital from sources other than the Centre, states and sponsor banks.

Currently, the Centre holds 50 per cent stake in RRBs, while 35 per cent and 15 per cent are with the concerned sponsor banks and state governments, respectively. 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 31 March 2024, 43 RRBs are operating through a network of 22,069 branches in 26 States and 3 Union Territories (Puducherry, Jammu and Kashmir, Ladakh) covering 700 districts of the country. The pace of technology adoption has increased as more RRBs have started rolling out digital services to their customers.