Finance

Centre looking to merge regional rural banks within same state, says report

Updated : February 27, 2019 10:22 AM IST

There are 56 RRBs operating in the country and India’s biggest lender, State Bank of India sponsors 14 of them.

“Ideally, we will like to have them reduced by 36 by the end of this fiscal,” an official was quoted as saying in the report.

Finance ministry has asked the state-owned banks to explore possibilities to merge regional rural banks (RRBs) operating within the same states, in an effort to consolidate such RRBs and eventually bring them down to a manageable number of 10-15, The Economic Times reported, citing people familiar with the matter.

There are 56 RRBs operating in the country and India’s biggest lender, State Bank of India sponsors 14 of them, the report said, adding that around 10 RRBs have been merged and will be effective from April 1 this year.

According to the report, a senior government official said that the idea of merging the regional banks is that of one bank leveraging its strong regional and market connect instead of 3-4 regional lenders in the state. “Ideally, we will like to have them reduced by 36 by the end of this fiscal,” the official was quoted as saying in the report.

Currently, the centre holds about 50 percent stake in RRBs, while the sponsor bank holds 35 percent and state government holds 15 percent, the report added. “In some lead banks which have more presence in a particular area, they can take over the stake of another lender in an RRB for purposes of synergy and efficiencies,” the sources were quoted as saying in the report.