Seven regional rural banks merged with BoB

Amalgamated bank to be largest rural bank in UP

Continuing with the process of amalgamating regional rural banks (RRBs), seven RRBs, sponsored by the Bank of Baroda, have been merged to form "Baroda Eastern UP Rural Bank".

The BoB-sponsored banks are located in Allahabad, Kanpur, Fatehpur, Faizabad, Sultanpur, Pratapgarh and Raibareli districts. The headquarters of the new bank will be located in Raibareli, the parliamentary constituency of Congress President Sonia Gandhi. This will be the biggest rural bank in UP. RK Bansal, deputy general manager of BOB has been named the chairman of the new bank.

Two other RRBs sponsored by BoB at Bareilly and Shahjahanpur are proposed to be amalgamated to form one bank with head office at Bareilly. The process is likely to be completed shortly.

The Chelapati Rao Committee, set up in the Narsihma Rao regime had recommended the merger of the RRBs. This proposal remained under various stages of consideration by the Centre and state governments for over eight years.

The Uttar Pradesh government had in principal also given its approval to the Union Finance Ministry proposal for the amalgamation of the Regional Rural Banks into one entity.

As many as 9 public sector banks had sponsored 36 RRBs in UP while one RRB sponsored by UP Co-operative Bank is located in Mainpuri district. The sponsored bank of the RRBs include Bank of Baroda, Bank of India, and State bank of India, Union Bank of India, Canera bank, Syndicate Bank, Punjab National Bank, Central Bank and Allahabad bank.

Three RRBs sponsored by the Union Bank of India located in Varanasi, Azamgarh and Jaunpur have already been amalgamated into one bank ``Kashi Gomti Joint rural Bank' with headquarter in Varanasi.

The process of amalgamation of two RRBs sponsored by the SBI in Gorakhpur and Basti district has already been completed. Process of amalgamation of three RRBs sponsored by the PNB in Muzaffarnagar, Bijnor and Ghaziabad district was completed last month in January.

Two new banks are proposed to be created after amalgating the six RRBs sponsored by the Allahabad bank covering 11 districts, having a network of 445 branches.

The RRBs at Sitapur, Lakhimpur and Bahriach will be amalgated into one bank with head office at Sitapur, while the RRBs at Hamirpur, Banda and Mirzapur to be named as the Triveni Rural Bank with its head office at Orai, Jalaun in the Bundelkhand region. The notification for the amalgamation of Allahabad Bank-sponsored RRBs are likely to be issued in March next.

Three RRBs sponsored by the Canara bank at Agra, Aligarh, and Etah are also to be emulated shortly.

The only RRB sponsored by the Syndicate at Moradabad will not be merged with any other bank and will maintain its independent status. The two Central bank-sponsored RRBs at Etawah and Ballia will not be merged for geographical reasons, as Etawah is in western UP, while Ballia is in the far east.

The Allahabad bank, in its proposal to the UP government, citing the benefits of merger, said total business of the amalgamated banks would be to the tune of Rs 2,490 crore, comprising deposits of Rs 1,684 crore, and advances of Rs 805 crore.

Funds of the amalgamated bank will reach Rs 301 crore and accumulated profit will Rs 238 crore. The total staff of the new unit, after merger, will be 2,029 which will be adequate to serve the branches and control offices through proper deployment.

Further, the establishment cost of the head office and regional office of the proposed amalgamated bank would come down by 33 per cent or Rs 4.16 crore in a year. The functioning of the proposed rural bank will be effectively monitored and controlled by a single board of directors in place of existing Board of 6 directors, the proposal pointed out.

In each RRB, 50 percent shares are held by the Union Finance Ministry, 35 percent by the sponsored bank while the state government holds 15 percent.

Nabard, and the banking department of the Union Finance Ministry have full administrative controls over the RRBs and the state government has no role except having its nominees in the board of each RRB.

Lauding the process of almalgamation, UP government sources said there would be no change in the basic structure and role of the RRBs, and that merger was only an administrative re-organisation.

Sources said the merger would help eliminating the vices of the district co-operative banks, which had creeped into the functioning of RRBs over the years, and make management more professional, besides cutting down on operational costs.

Moreover, sources said, the restructuring of RRBs was overdue as rural banks set up in 1976 under the RRB Actwere not performing up to expectations, as they were set up as low-cost institutions for credit delivery to the rural sector.