"RRB MERGERS "

It’s 8 and merging

G Ganapathy Subramaniam NEW DELHI


IN A bid to speed up consolidation among regional rural banks (RRBs), the central government is facilitating merger of eight RRBs. Ratnagiri Sindhudurg Gramin Bank and Solapur Gramin Bank merger has been assigned top priority. Both RRBs are sponsored by Bank of India. Jammu Rural Bank is being merged with Kamraz Rural Bank, according to government sources. Both banks are located in Jammu & Kashmir and sponsored by J&K Bank.

Two other RRB mergers are also being processed while Kosi Kshetriya Gramin Bank and Uttar Bihar KGB, both located in Bihar, were merged in May, the sources said. Central Bank of India was the sponsor for both banks. The RRB mergers are aimed at strengthening the rural credit delivery system, especially when farm loan waiver is in focus and the government is taking steps to ensure that rural poor don’t have to depend on moneylenders.

Ballia KGB and Etawah KGB, both sponsored by Central Bank of India, are also being amalgamated. Similarly, Lucknow KGB and Triveni KGB ––both sponsored by Allahabad Bank ––are also being merged. These four RRBs are located in Uttar Pradesh.

More mergers among RRBs would be taken up during the current fiscal, the sources said.

The government is selecting banks with the same sponsor and those located with the same state for such mergers. After the process of structural consolidation in this sector was initiated in 2005, the number of RRBs has come down to 88 as compared to 196 earlier.

Further consolidation will bring down the number gradually, the sources added.
Expansion of RRBs is being encouraged by the central government and the consolidation process is being facilitated to ensure that these banks are in good health for rapid expansion. More than Rs 100 crore is being pumped in by the central government for recapitalisation of RRBs. This is in addition to the Rs 303 crore released in March 2008, the sources added.

The next tranche of Rs 100 crore will benefit Bihar Kshetriya Gramin Bank, Vananchal Gramin Bank, Bangiya Gramin Vikash Bank and Samastipur Kshetriya Gramin Bank.

According to government estimates, 27 RRBs need recapitalisation of Rs 1,795 crore. Out of these, 11 have undergone mergers while the others are functioning as stand-alone units.

With consolidation being facilitated by the government, RRBs have launched 268 new branches recently. Out of the 749 applications from this sector for new branches, the Reserve Bank had cleared 554.

RRBs are jointly owned by the Centre, concerned state governments and sponsor banks. While the Centre holds 50%, states have 35% and the balance 15% is with the sponsor bank.