The central government is assisting merger of four regional rural banks (RRBs), in order to speed up unification among RRBs. Among RRBs merger Ratnagiri Sindhudurg Gramin Bank and Solapur Gramin Bank is in top priority and both the banks are being sponsored by Bank of India. As per government sources Jammu Rural Bank is being merged with Kamraz Rural Bank. Both the banks are being sponsored by J&K Bank and are located in Jammu & Kashmir.
According to sources Kosi Kshetriya Gramin Bank (KGB) and Uttar Bihar KGB, both located in Bihar were merged in May while processing of two other RRB mergers is being worked on. The main aim behind the RRB mergers is to strengthen the rural credit delivery system especially keeping in view the farm loan waiver, moreover the government is working on to ensure that rural poor don’t have to depend on money lenders.
The other banks which are in process of merger are Ballia KGB and Etawah KGB, both sponsored by Central Bank of India. Likewise, Lucknow KGB and Triveni KGB –– both are being sponsored by Allahabad Bank. These four RRBs are located in Uttar Pradesh
According to sources more mergers among RRBs is likely to take place during the current fiscal year. The government is selecting the banks for merger mainly having same sponsor and those located with the same state. In 2005 the process of structural consolidation of RRBs was started and from then the number of RRBs has reduced to 88 as compared to 196. the sources said more consolidation will further bring down the number.
Government sources said central government is encouraging expansion of RRBs and the consolidation process is being facilitated to ensure that these banks become capable to compete with other banks and be in good health for rapid expansion. Central government is giving more than Rs 100 crore for recapitalization of RRBs. This is additional to the Rs 303 crore released in March 2008.
The next grant 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 calculation, 27 RRBs need recapitalisation of Rs 1,795 crore. Out of which 11 have undergone mergers while the others are operating as stand-alone units.
From the time the government has started supporting consolidation of RRBs around 268 new branches have been launched recently. Till now Reserve Bank has cleared 554 out of 749 applications from this sector for new branches.
RRBs are owned jointly by the Centre, concerned state governments and sponsor banks. In which the Centre holds 50%, states have 35% and the balance 15% is with the sponsor bank.