New Delhi/Bhubaneswar: The Odisha Gramya Bank and Utkal Grameen Bank will be merged into one entity from May 1, 2025. This is part of the Government of India’s ‘One state-one RRB’ scheme. RRB stands for Regional Rural Bank. The Ministry of Finance has issued a notification for the consolidation of 15 RRBs across 11 states to achieve better operational efficiency and cost rationalization.
As per the gazette notification, RRBs in 11 states – Odisha, Andhra Pradesh, Uttar Pradesh, West Bengal, Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra and Rajasthan are to be merged into a single entity for each state.
This is the fourth round of consolidation that will reduce the number of RRBs to 28 from the existing 43.
The notification states that, in line with the powers granted under Section 23A(1) of the Regional Rural Banks Act, 1976, these RRBs will merge into a single entity in public interest and in the interest of the development of the areas served by these entities and also in the interest of the RRBs themselves.
In Odisha, the Odisha Gramya Bank is sponsored by Indian Overseas Bank and Utkal Grameen Bank by The State Bank of India. These banks were formed under the RRB Act, 1976, with an objective to provide credit and other facilities to small farmers, agricultural labourers and artisans in rural areas.
All the entities would have authorised capital of Rs 2,000 crore, the notification says. As a precursor to consolidation, capital infusion was done in these RRBs. The financial year 2021-22 was a watershed year in the context of RRBs as the Centre decided to infuse Rs 5,445 crore as its share over a period of two years to facilitate growth capital.
In this backdrop, the performance of RRBs has improved during 2023-24 and has reached historic highs on several parameters. RRBs posted the highest ever consolidated net profit of Rs 7,571 crore during 2023-24 and their consolidated capital adequacy ratio was at an all-time high of 14.2 percent as on March 31, 2024.
The asset quality measured by GNPA (Gross Non-Performing Assets) at 6.1 per cent was the lowest in the previous 10 years.
The Centre had initiated structural consolidation of RRBs in 2004-05, which resulted in reduction of such institutions from 196 to 43 till 2020-21 through 3 phases of amalgamation.
Currently, the Centre holds 50 per cent stake in RRBs, while 35 per cent and 15 per cent are with the concerned sponsor banks and state governments, respectively. Even after stake dilution, the shareholding of the Centre and the sponsor public sector banks together cannot fall below 51 per cent, as per the amended Act.
As of March 31, 2024, 43 RRBs are operating through a network of 22,069 branches in 26 states and 3 Union Territories, covering 700 districts of the country. The pace of technology adoption has increased as more RRBs have started rolling out digital services to their customers.
