Government Merges 26 Regional Rural Banks into 12 Entities Under ‘One State One RRB’ Policy

By Upstox News Desk

Date: April 8, 2025 | Updated: April 8, 2025, 16:58 IST

In a significant move aimed at enhancing the efficiency of rural banking services, the Indian government has officially notified the merger of 26 Regional Rural Banks (RRBs) into 12 consolidated entities. This decision is a part of the ‘One State One RRB’ policy, which aims to promote scale efficiency and reduce operational redundancies among these financial institutions.

Background of the Merger

The finance ministry first announced the amalgamation plan in November 2024 for public consultation. Following stakeholder engagement, the government advanced with the mergers, which involve RRBs from ten states and one Union Territory. This reorganization will reduce the total number of RRBs in the country from 43 to 28, significantly streamlining the rural banking landscape.

The newly merged entities will collectively manage more than 22,000 branches, serving approximately 700 districts, with nearly 92% of these branches located in rural and semi-urban areas. The government anticipates that this strategic move will enable these lenders to cut costs and mitigate excessive competition among the public sector banks that sponsor these RRBs.

Details of the Mergers

The gazette notification issued on April 5 outlines the specifics of the mergers in various states:

• Andhra Pradesh: Chaitanya Godavari Grameena Bank, Andhra Pragathi Grameena Bank, Saptagiri Grameena Bank, and Andhra Pradesh Grameena Vikas Bank will be merged to form the Andhra Pradesh Grameena Bank, headquartered in Amravati. This new entity will operate under the sponsorship of Union Bank of India, with an authorized capital of ₹2,000 crore.

• Bihar: Dakshin Bihar Gramin Bank and Uttar Bihar Gramin Bank have been combined into the Bihar Gramin Bank, with its head office located in Patna, backed by Punjab National Bank.

• Gujarat: Baroda Gujarat Gramin Bank and Saurashtra Gramin Bank will merge to establish the Gujarat Gramin Bank, headquartered in Vadodara, under Bank of Baroda.

• Jammu & Kashmir: The two banks—J&K Grameen Bank and Ellaquai Dehati Bank—will combine forces to form the Jammu and Kashmir Grameen Bank, with operational headquarters in Jammu, sponsored by The Jammu and Kashmir Bank Ltd.

• Karnataka: Karnataka Vikas Grameena Bank and Karnataka Gramin Bank will be merged, resulting in the Karnataka Grameena Bank, headquartered in Ballari and championed by Canara Bank.

• Madhya Pradesh: The Madhya Pradesh Gramin Bank and Madhyanchal Gramin Bank will form a new entity named Madhya Pradesh Gramin Bank, with headquarters in Indore, under the sponsorship of Bank of India.

• Maharashtra: Maharashtra Gramin Bank and Vidharbha Konkan Gramin Bank will amalgamate into the Maharashtra Gramin Bank, with its head office at Chhatrapati Sambhajinagar, sponsored by Bank of Maharashtra.

• Odisha: Odisha Gramya Bank and Utkal Grameen Bank will be merged to form the Odisha Grameen Bank, headquartered in Bhubaneswar, under the sponsorship of Indian Overseas Bank.

• Rajasthan: Rajasthan Marudhara Gramin Bank and Baroda Rajasthan Kshetriya Gramin Bank will combine to create Rajasthan Gramin Bank, with offices in Jaipur and State Bank of India’s sponsorship.

• Uttar Pradesh: Baroda U.P. Bank, Aryavart Bank, and Prathama U.P. Gramin Bank will join to establish the Uttar Pradesh Gramin Bank, headquartered in Lucknow, under Bank of Baroda.

• West Bengal: Bangiya Gramin Vikash, Paschim Banga Gramin Bank, and Uttarbanga Kshetriya Gramin Bank will merge into the West Bengal Gramin Bank, with its head office in Kolkata, also under the sponsorship of Punjab National Bank.

The mergers will officially take effect on May 1, 2025. ## Motivations Behind the Merger

This strategic restructuring comes as a response to ongoing challenges faced by RRBs, including limited access to capital and outdated technological infrastructure. While RRBs, which are co-owned by the central government, state governments, and sponsor banks, have played a significant role in providing credit to rural areas, there have long been calls for structural reforms to enhance their effectiveness.

In June 2024, prominent bank unions, including the All India Bank Officers’ Confederation (AIBOC) and the All India Bank Employees Association (AIBEA), advocated for the merging of RRBs with scheduled commercial banks. They argued that overlapping services between RRBs and sponsor banks were leading to inefficiencies, and a merger would provide consumers with better access to modern banking services.

“The RRBs are constrained in offering modern banking products and their customers are discriminated in terms of access,” the unions stated. They emphasized that such integrations would provide uniformity in service offerings and strengthen the rural credit ecosystem.

As the implementation date approaches, stakeholders and banking sector observers anticipate whether this bold initiative will indeed enhance operational efficiencies and improve service delivery in the rural banking sector.

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