The amalgamation was done by the Central Government in exercise of the powers conferred under Regional Rural Banks Act, 1976.
This is the fourth phase of amalgamation and post amalgamation, there will be 28 RRBs (down from 43 earlier) in 26 states and 2 UTs.
- E.g., Baroda U.P. Bank, Aryavart Bank and Prathama U.P. Gramin Bank in the State of Uttar Pradesh have been amalgamated into a single RRB – Uttar Pradesh Gramin Bank.
The first phase of amalgamation (FY 2006 to FY 2010) was based on recommendations of the Dr. Vyas Committee with focus on merging RRBs under the same sponsor bank within a state.

About Regional Rural Banks

Genesis: Regional Rural Banks were established in 1975 based on the recommendations of the Narasimham Working Group.
- The first five RRBs were set up on 2^nd October 1975 through an ordinance, which was later replaced by the Regional Rural Banks Act, 1976.
Ownership: Jointly owned by Government of India (50% stake), the concerned State Government (15%), and the sponsoring commercial bank (35%).

Data Bank listing important data related to Status of RRBs in India as of March 2024 (NABARD)

Regulation and Supervision: RRBs are regulated by the Reserve Bank of India (RBI) under the Banking Regulation Act, 1949 and supervised by the National Bank for Agriculture and Rural Development (NABARD).
- For tax purposes, they are treated as cooperative societies under the Income Tax Act, 1961.
Requirements:
- Must allocate 75% of ANBC (Adjusted Net Bank Credit) or CEOBE (Credit Equivalent of Off-Balance Sheet Exposure) whichever is higher to Priority Sector Lending (PSL).
- Must maintain a Capital to Risk-Weighted Assets Ratio (CRAR) of 9%, as per RBI norms.

Significance of One State One RRB

Accelerated business growth: Total RRB business as a percentage of India's GDP is expected to reach ~5.2%6 by FY30 from ~3.7%6 as of FY24.
Financial Benefits: The amalgamated RRB will have-
- Greater capital base to meet RBI mandated capital adequacy norms;
- Improved liquidity position owing to increased availability of funds and improved efficiency due to economies of scale.
Improved compliance: A unified RRB can centralise compliance functions, such as anti-money laundering checks, KYC verification and reporting to the RBI and NABARD.
Strengthened lending capacity: This enables higher credit flow to rural sectors, particularly MSMEs and agriculture.
- In 2022-23, Regional Rural Banks accounted for 11.2% of total agricultural ground level credit
Promoting financial inclusion: Improved tech and infrastructure can expand digital reach and support product innovation aligned with government schemes.
- For instance, some RRBs have successfully implemented customer-centric digital services such as Micro-ATMs, call centres, net banking, Video KYC, RTGS, and IMPS.
Enhanced competitiveness: Pooled resources and expertise may allow diversified and locally tailored products which will boost market position and rural outreach.
- Products such as microfinance options for small businesses, seasonal crop-linked savings schemes and products bundled with insurance plans etc. can be offered.
Consolidated IT and technological infrastructure: It can result in superior overall capabilities for the merged entity – including improved cybersecurity, fraud prevention, big data analytics etc.
Other benefits:
- Operational efficiency through rationalization of branch network, elimination of redundant processes and reduction in operational overheads.
- Availability of a large pool of capable personnel with diverse skills.
- Enhanced oversight and operational guidance by aligning RRBs with regionally strong sponsor banks can.

Challenges in Amalgamation of RRBs
Operational	Governance and stakeholder management
Differences in operational and organizational structure of amalgamated banks Unexpected delays and downtime, with impact on customers Operational difficulty associated with physical movement and maintenance of documents and files	Issues related to workforce realignment and employee movement among amalgamated banks Difficulties in tracking updates across departments and technology service providers
Financial	Technological
Inconsistencies in the chart of accounts and variability in the mapping of branch and corporate ledgers Possibility of an adverse impact on the CRAR ratio after amalgamation Complications in the movement of securities, funds and investments	Issues related to ensuring secure migration of CBS data High volume of data related to transaction histories and migrated data backups

Conclusion

To ensure the success of the "One State-One RRB" amalgamation, it is crucial to harmonize HR policies, integrate digital systems, streamline branch operations, and tailor products to local needs. Strengthening NPA recovery, forming state-level monitoring committees, and conducting regular financial reviews will help address challenges and promote financial stability and rural inclusion.