India's Regional Rural Banks (RRBs) Consolidation: One State, One RRB
The Regional Rural Banks (RRBs)/Grameen Banksnetwork in India has undergone a significant restructuring after the 'One State-One RRB' initiative came into effect from 1st May 2025. Under this scheme, several RRBs, operating in a particular state or union territory (UT), have been amalgamated into a single entity/RRB.As a result of this strategic amalgamation move the total number of RRBs in India has come down to 28. Since March 2021, there were 43 RRBs in India. In April 2025, the Department of Financial Services, Ministry of Finance, Government of India, notified the amalgamation of 26 RRBs spanning across 10 states and one UT into 11 entities. These states and UT are Andhra Pradesh (04 RRBs), Bihar (02), Gujarat (02), Karnataka (02), Madhya Pradesh (02), Maharashtra (02), Odisha (02), Rajasthan (02), Uttar Pradesh (03), West Bengal (03) and Jammu & Kashmir (02).Post-amalgamation, these states and UT have one merged RRB each.These 28 RRBsin 26 states and 2 UTs have more than 22000 branches and cover 700 districts in India.
The origin of RRBs in India dates back to 1975. Based on the recommendation of Narasimham Committee, the first RRB, i.e., Prathama Bank sponsored by Syndicate bank (merged with Canara bank), was established in Uttar Pradesh. It is noteworthy that RRBs in India follow the tripartite ownership pattern where Government of India, sponsor bank, and concerned state government own the RRB in the ratio of 50:35:15, respectively. With the rapid growth in the demand for rural credit, the number of RRBs in India increased rapidly to 196 by the year 1990. The RRBs are regionally oriented and rural-focussed financial institutions which play an important role in the rural financial ecosystem.The purpose of the establishment of RRBs was to develop rural economy by channelising institutional credit. These banks predominantly operate in rural/semi-urban areas as more than 92% of the branches are located inthese areas. In some contexts, RRBsare considered to be more advantageous than the commercial banks because of theirunique selling point (USP), i.e., closeness to communities. Generally, RRBs provide banking services to those groups in the society which are often neglected by the commercial banks. These groups include small/marginal farmers, artisans, agricultural labourers, small entrepreneurs etc. Moreover, RRBs are credited for being a facilitator of inclusive banking and financial literacy.
However, the RRBs in India faced some serious operational and infrastructural challenges. In order to address these challenges, the government of India took steps to merge the RRBs in a phased manner. In the first phase of amalgamation, started in the year 2004-05, the total number of RRBs in India came down to 82 from 196. In the second phase, the number came down to 56. In the third phase, the number came down to 43. There have been improvements in efficiency of the RRBs because of these amalgamations. In the year 2023-24, the RRBs had achieved the highest ever net profit of ₹ 7, 571 crores.
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