AIBEA Demands Merger of Weak Regional Rural Banks With Sponsor Banks

The All India Bank Employees’ Association (AIBEA), in a letter written to Finance Minister Nirmala Sitharaman on Monday, said the government should consider restructuring regional rural banks (RRBs) by merging weak RRBs with their sponsor banks to make them more viable.

“We suggest merging these RRBs with the sponsor banks would be a better proposition, as this will add to the rural network of sponsor banks, and also eliminate the weaknesses which RRBs are presently suffering from,” it said.

Monitoring would be much more effective as they would become part of the bank and come under direct control of the management of the sponsor banks, AIBEA general secretary C H Vekatachalam said.

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. As per the Act, the shareholding among the Centre, concerned state governments and sponsor or promoter banks, is in the ratio of 50:15:35, respectively. After the central government, the sponsored bank is the largest shareholder with 35 per cent stake. To begin with, there were 196 RRBs, which, over a period of time, have been consolidated into 43.

Even though objectives of RRBs are laudable, the very nature of the business being carried on by them made them fragile and vulnerable, Vekatachalam said, adding there have been many efforts to restructure RRBs to make them strong and vibrant, but the results have not been encouraging because of intrinsic reasons.