Executive Summary:
The Ministry of Finance addressed the amalgamation of Regional Rural Banks (RRBs) to enhance their operational efficiency and financial stability. Since 2005, the government has been consolidating RRBs in phases, reducing their number from 196 to 28 by May 1, 2025. State Level Monitoring Committees (SLMC) and a National Level Project Monitoring Unit (NLPMU) were constituted to oversee the implementation, ensuring the protection of employee interests and uninterrupted services for rural customers.
Key Points / Main Content:
* **Amalgamation Phases:**
* Phase I (2005-2010): RRBs reduced from 196 to 82 by merging RRBs of the same Sponsor Bank within a State.
* Phase II (2012-2014): RRBs reduced from 82 to 56 by merging RRBs across Sponsor Banks within a State with geographically contiguous areas.
* Phase III (2019-2021): RRBs reduced from 56 to 43 by merging weaker RRBs with stronger RRBs.
* Phase IV (Effective May 1, 2025): RRBs reduced from 43 to 28 in 26 states and 2 UTs.
* **Rationale:**
* Improve operational viability and economies of scale.
* Achieve benefits of scale efficiency and cost rationalization.
* Simplify management and ease service delivery.
* Increase capital base and enhance financial stability.
* Enable investment in advanced technology platforms.
* **Monitoring and Implementation:**
* SLMC and NLPMU constituted to oversee implementation.
* NABARD issued National Level Standard Operating Procedure (SOP) with detailed guidelines.
* Amalgamation Project Management Unit (APMU), Steering Committee, and Functional Committees to be set up in each Anchor/Transferee RRB.
* **Employee and Customer Protection:**
* Remuneration and service conditions of existing employees protected.
* Inter-se seniority guided by NABARD’s SOP.
* Publicity of amalgamation through various communication channels.
* Establishment of call centers to handle customer grievances.
* Continuation of branch operations and migration of accounts without major disruption.
Impact Analysis:
Employees of RRBs:
* Impact: Protection of remuneration and service conditions. Inter-se seniority will be guided by NABARD's SOP.
* Action Required: Follow guidelines issued by the APMU regarding harmonized policies and operational procedures.
Rural Customers:
* Impact: Uninterrupted access to banking services with continued branch operations. Migration of accounts, deposits, and loans.
* Action Required: Stay informed through provided communication channels and utilize call centers for grievances.
RRBs (Anchor/Transferee):
* Impact: Consolidation of operations, elimination of redundancies, increased capital base, and investment in advanced technology.
* Action Required: Establish APMU, Steering Committee, and Functional Committees. Finalize harmonized policies and operational guidelines. Implement day-to-day integration plan.
NABARD:
* Impact: Responsible for issuing and overseeing the implementation of the National Level SOP.
* Action Required: Continue to provide guidance and support for the amalgamation process, ensuring smooth integration and adherence to guidelines.
State Level Monitoring Committee (SLMC) and National Level Project Monitoring Unit (NLPMU):
* Impact: Responsible for overseeing and monitoring the implementation of the amalgamation program.
* Action Required: Regularly monitor progress, address any issues, and ensure compliance with the established guidelines.
Key Entities Referenced
Regional Rural Banks: Financial institutions in India focused on providing credit and banking services to rural areas.
Shri Shankar Lalwani: Member of LOK SABHA who raised the question about amalgamation of RRBs
Shri Jagdambika Pal: Member of LOK SABHA who raised the question about amalgamation of RRBs
Nirmala Sitharaman: The Finance Minister who provided the answer to the LOK SABHA question regarding the amalgamation of Regional Rural Banks.
NABARD: National Bank for Agriculture and Rural Development, an apex development financial institution in India.
Reserve Bank of India: The central bank of India, responsible for regulating the banking system.
National Level Project Monitoring Unit: An organization established by the Government to oversee and monitor the implementation of the RRB amalgamation program.
State Level Monitoring Committee: An organization established by the Government to oversee and monitor the implementation of the RRB amalgamation program at state level.
Govemment of India
Ministry of Finance
Department of Financial Services
LOKSABHA
*10
Starred Question No.
ANSWERED ON MONDAY, 2I JULY, 2025/ 30 ASHADHA, 1947 (SAKA)
Amalgamation of Regional Rural Banks (RRBs)
t* 10. Shri Shankar Lalwani:
Shri Jagdambika Pal:
Will the Minister of FINANCE be pleased to state:
(a) whether the amalgamation ofRegional Rural Banks (RRBs) has enhanced their operational
efficiency and financial stability;
(b) if so, the details thereof;
(c) the timeline and fiamework fxed for monitoring the implementation of this amalgamation;
and
(d) the steps taken to protect the interests of existing RRB employees and rural customers
during and after the said amalgamation process?
Answcr
THE FINANCE MINISTER
(SMT. NIRMALA SITHARAMAN)
(a) to (d): A statement is laid on the Table ofthe House*10
Statement referred in reply to parts (a) to (d) ofLok Sabha Starred Question No, to
be answered on 21.07.2025 regarding 'Amalgamation of Regional Rural Banks (RRBS)'
by Shri Shankar Lalwani and Shri Jagdambika Pal:
(a) and (b): In order to improve operational viability of Regional Rural Banks (RRBs) and to
take advantage of economies of scale, Govemment of India initiated struchrral consolidation
of RRBs in FY 2005-06. In Phase-I amalgamation (2005-2010), the number of RRBs was
brought down from 196 to 82 by amalgamating RRBs of the same Sponsor Bank within a State.
In Phase-II amalgamation (2012-14), the number of RRBs was brought down from 82 to 56,
by amalgamating RRBs across Sponsor Banks within a State with geographically contiguous
areas of operation. Phaselll amalgamation was initiated in the year 2019 by amalgamating
weaker RRB with the stronger RRB. As a result of Phaselll amalgamation, the number of
RRBs were brought down from 56 to 43 at the end-March 2021.
A study on the impact of amalgamation of RRBs on their financial performance was undertaken
by NABARD in 2021 and it was observed that the amalgamation process in the past had
resulted in irnproved viability and financial performance of the RRBs. Findings of the study
were published by Reserve Bank of India (RBI) in their Statutory Publication on 'Report on
Trend and Progress of Banking in India (2020-2021).
The srudy revealed that during the different phases of amalgamation, the share of profitable
and sustainably viable RRBs improved continuously and the quanhrm of accumulated losses
as a percentage of total assets also declined. Improved profitability of RRBs post
amalgamation, coupled with capital infusion in weak banks, boosted their leverage ratio, as
well as the reserves to capital ratio.
Guided by the principle of 'One State-One RI{B', the Govemment continued with the process
of further consolidation of RRBs in PhaselV amalgamation to achieve the benefits of scale
efficiency and cost-rationalisation, whereby number ofRRBs has been reduced from 43 to 28
w.e.f. 01.05.2025, in 26 states and 2 UTs, vide GoI notification dated 05.04.2025.
Amalgamation of RRBs has resulted in formation of a state level RRB with contiguous area of
operation leading to simplifuing management and ease of service delivery. The RRBs have
increased their capital base, enhancing the financial stability and resilience of the merged
entity. By consolidating operations and eliminating redundancies on account of separate
administrative structures, amalgamation is expected to lead to cost savings. Further,
amalgamated RRBs can invest in and leverage advanced technology platforms, leading to
improved operational efficiency and customer service.
(c) The amalgamation of RRBs, guided by the principle of 'One State-One RRB', has been
carried out based on the audited financials as on 30.04.2025 with effective date of
amalgamation as 01.05.2025. The Govemment has constituted State Level Monitoring
Committee (SLMC) and National Level Project Monitoring Unit (NLPMU) to oversee and
monitor the implementation of the amalgamation programme.NABARD has issued National Level Standard Operating Procedure (SOP), containing detailed
guidelines, which, inter alia, advises setting up of Amalgamation Project Mamgement Unit
(APMU), Steering Committee and Functional Committees in every Anchor/Transferee RRB to
finalise the harmonised policies and operational guidelines, and to handle day-to-day
integration plan.
(d) The GoI Notification of amalgamation, inter alio, provides for protection of the
remuneration and conditions of service of the existing RRBs employees. The inter-se seniority
of officers and employees are guided by the National Level SOP issued by the NABARD. To
protect the interest of rural customers, the NLPMU has advised all RRBs to give adequate
publicity of amalgamation through various communication channels (electronic & print media,
SMS to customers, customer awareness meets at branch level etc). Further, RRBs have been
advised to take necessary steps to set up call centres to handle customer grievances. As
informed by NABARD, all branches continue to frmction under the new entities, ensuring
uninterrupted access to banking services. Migration of customer accounts, deposits, and loans
is being carried out without any major disruption.