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The proposed merger reduces the number of RRBs from 43 to 28 to make them more efficient.
- Consolidation is also derived from vision of One State-One RRB.
Consolidation of RRBs
- RRBs have been consolidated in a phased manner based on recommendations of Dr. Vyas Committee (2001).
- Consolidation began in 2004-05 which resulted in reduction of such institutions from 196 to 43 till 2020-21 through 3 phases of amalgamation.
- Significance of consolidation: Minimised overhead expenses, technology adoption, enhanced capital base and area of operation, and increased exposure.
About Regional Rural Banks (RRBs)
- Genesis: Established in 1975 on the recommendations of the Narsimhan Working Group (1975), after promulgation of an ordinance, which was later replaced by the Regional Rural Banks Act, 1976.
- Objectives: To develop the rural economy by providing credit and other facilities particularly to small and marginal farmers, agricultural labourers, small entrepreneurs etc.
- Shareholding: Government of India (50%), State Government (15%), and Sponsor Bank (35%)
- They are Scheduled Commercial Banks (Government Banks) regulated by RBI and supervised by National Bank for Agriculture and Rural Development (NABARD).
- Created primarily for rural areas, however, may also set up branches in urban areas.
Other Initiatives Taken to Boost Functioning of RRB
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