'One State, One RRB' policy gains momentum; may make debut in March 2025

The plan to consolidate regional rural banks (RRBs) under the ‘One State, One RRB’ policy has gained momentum. The Centre is bringing stakeholders on board and aims to complete the process by the end of FY25, according to a source familiar with the matter.

“The work on ‘One State, One RRB’ is progressing rapidly, and we expect to complete it by the end of this financial year. This will co-occur across different states. We’ve already onboarded the states and regulators, including the Reserve Bank of India and the National Bank for Agriculture and Rural Development,” said a senior official.
 

Business Standard reported on September 6 that the Union finance ministry is planning to consolidate RRBs under the ‘One State, One RRB’ policy to improve efficiency and reduce competition among sponsoring public sector banks.
 

According to the source, after the state-wise amalgamation, each state’s RRB will be assigned a unique name. “For example, in Uttar Pradesh, there are three RRBs —Aryavart Bank, Baroda UP Bank, and Prathama UP Gramin Bank. Following amalgamation, a new name will be assigned to the state’s RRB,” the official said.
 

The source added that a new board will be constituted for each amalgamated RRB, and a new chairman will be appointed. The choice of sponsor bank will depend on the performance records of the RRBs.
 

Currently, Sikkim and Goa are the only two states without RRBs. The official noted that these states will also have their own RRBs under the ‘One State, One RRB’ initiative.
 

RRBs were established regionally and focused on rural areas, with capital contributed by the Government of India, state governments, and sponsor banks under the RRB Act, 1976. State Bank of India, the largest public sector lender, sponsors the highest number of RRBs (14), followed by Punjab National Bank (9) and Canara Bank (4). Bank of Baroda, Bank of India, and Indian Bank sponsor three RRBs each; Central Bank of India sponsors two; and UCO Bank, J&K Bank, Indian Overseas Bank, Union Bank of India, and Bank of Maharashtra sponsor one each.
 

Andhra Pradesh, Uttar Pradesh, and West Bengal each have three RRBs, while Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, and Telangana have two RRBs each. Last month, Union Finance Minister Nirmala Sitharaman chaired a meeting with top RRB officials and instructed sponsor banks to focus on improving business performance, upgrading digital technology services, and fostering growth in micro, small and medium enterprise clusters.
 

RRBs were also advised to maintain an up-to-date technology stack to stay relevant. The finance minister highlighted that digital banking services, such as mobile banking, would be especially valuable in regions with challenging physical connectivity, like the Northeastern states and hilly areas.
 

“The sponsor banks play a crucial role in these efforts by providing technical assistance, sharing best practices, and ensuring that RRBs have access to the necessary resources for success,” read a statement from the finance ministry.

Improving efficiency

 Each state will have a single RRB; states without RRBs, like Sikkim and Goa, will establish their own
 

 A new board and chairman will be appointed for each state’s RRB after amalgamation
 

 Finance Minister Nirmala Sitharaman has urged RRBs to focus on improving digital services and supporting MSME growth