The government expects consolidation to further drive business diversification and cost rationalisation and help these regional lenders compete with other commercial lenders including small finance banks.
“The idea is that consolidation should ensure better NPA management, technology adoption, corporate governance, and HR development in RRBs,” said the official cited above.
Currently, there are 43 RRBs supported by a dozen public sector banks with 21,856 branches. The government has maintained that consolidation among RRBs has led to better efficiency, increased productivity, and greater credit flow to rural areas. As per the initial roadmap, the plan was to consolidate the number of regional lenders to 38, the official added.
Under the viability plan created for each regional lender, the focus is to tap credit potential for MSMEs and put greater thrust on growing the network of rural branches in cluster areas.
“We expect RRBs to further tap opportunities through the government’s financial inclusion programme, including Jan Suraksha schemes, and look at diversifying their product portfolio,” a senior bank executive said, adding that sponsor banks have been directed by the government to help RRBs implement their sustainable viability plan.
The total recapitalisation assistance to RRBs sanctioned during 2021-22 and 2022-23 was Rs 10,890 crore. This was shared by the Centre, state governments, and sponsor banks in the ratio of 50%, 15%, and 35%, respectively.
(You can now subscribe to our Economic Times WhatsApp channel)