Govt chalks plan to merge 13 more RRBs

The government has chalked out a plan to merge 13 more regional rural banks (RRBs) as a part of its consolidation strategy to make them viable. With these mergers, the total number of RRBs in India drops to 82 from the present 95. The criteria for merging RRBs would be based on geographical proximity and contiguity.

In September 2005, the government merged 101 such banks, bringing down the total number of RRBs to 95 from 196. “Our internal analysis show that 13 more RRBs can be merged,” a finance ministry official said. The government expects the mergers to staunch bleeding by these banks. By March end, 39 loss-making RRBs were in the red by as much as Rs 2,814 crore after they failed to recover farm loans. Total lending by RRBs is around Rs 50,000 crore. In addition, these banks were hit by a wage hike.

Although RRBs have a deposit base of around Rs 90,000 crore, they have a low earning capacity, suffer poor recoveries, high operational costs and low profitability, as their operations are restricted to target groups. The finance minister had announced a Rs 1,850-crore rescue package to help ailing RRBs write off their losses by March 2010. “Net NPAs of all the RRBs, now at 3.4 per cent of their loan advances, has to be brought down to 1.3 per cent by March 2010,” he had said.