'One state-one RRB' to be effective from May 1 as finmin approves consolidation of 15 regional rural banks

New Delhi | One state-one RRB will become a reality beginning next month as the finance ministry has issued notification for consolidation of 15 Regional Rural Banks across 11 states for achieving better operational efficiency and cost rationalisation.

With this fourth round of consolidation of regional rural banks (RRBs), the number would reduce to 28 from the existing 43.

As per the gazette notification, RRBs in 11 states -- Andhra Pradesh, Uttar Pradesh, West Bengal, Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan -- are to be merged into one entity, respectively, for each of these to realise the goal of 'one state-one RRB'.

The effective date for amalgamation has been fixed May 1, as per the gazette notification dated April 5, 2026.

As per the notification, in line with the powers granted under Section 23A(1) of the Regional Rural Banks Act, 1976, these RRBs will merge into a single entity in the public interest and in the interest of the development of the area served by the these entities and also in the interest of the Regional Rural Banks themselves.

For example, Chaitanya Godavari Grameena Bank, Andhra Pragathi Grameena Bank, Saptagiri Grameena Bank and Andhra Pradesh Grameena Vikas Bank sponsored by Union Bank of India, Canara Bank, Indian Bank and State Bank of India amalgamated into a single Regional Rural Bank called as Andhra Pradesh Grameena Bank.

The head office of the new entity would be at Amravati and the RRB would be under sponsorship of Union Bank of India, it said.

In case of Uttar Pradesh and West Bengal, 3 RRBs to be merged into one in each of these states.

As far as Uttar Pradesh is concerned, Baroda U.P. Bank, Aryavart Bank and Prathama U.P. Gramin Bank sponsored by the Bank of Baroda, Bank of India and Punjab National Bank amalgamated into Uttar Pradesh Gramin Bank with its head office at Lucknow under the sponsorship of Bank of Baroda.

In case of West Bengal, Bangiya Gramin Vikash, Paschim Banga Gramin Bank and Uttarbanga Kshetriya Gramin Bank sponsored by the Punjab National Bank, UCO Bank and Central Bank of India to be amalgamated into West Bengal Gramin Bank with its head office in the state capital under sponsorship of Punjab National Bank.

In eight states -- Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha and Rajasthan, two RRBs would be merged into one.

For instance, Dakshin Bihar Gramin Bank and Uttar Bihar Gramin Bank will be merged into an entity called as Bihar Gramin Bank with its head office at Patna under the sponsorship of Punjab National Bank.

With regard to Gujarat, Baroda Gujarat Gramin Bank and Saurashtra Gramin Bank hereby amalgamated into a single Regional Rural Bank, which shall be called as Gujarat Gramin Bank with its head office at Vadodara under the sponsorship of Bank of Baroda.

For the Union Territory of Jammu and Kashmir, J & K Grameen Bank and Ellaquai Dehati Bank sponsored by J&K Bank and State Bank of India to be merged into a single RRB called as Jammu and Kashmir Grameen Bank with its head office at Jammu under the sponsorship of J&K Bank, it said.

All the entities would have authorised capital of Rs 2,000 crore, it added.

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 Rs 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 Rs 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.

The Act was 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 March 31, 2024, 43 RRBs are operating through a network of 22,069 branches in 26 states and 3 Union Territories (Puducherry, Jammu & 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.