 "Baroda UP Bank")
In what could be one of the largest branch rationalisation exercises by any regional rural bank (RRB), Baroda UP Bank — sponsored by Bank of Baroda (BoB) — has decided to merge and close down 268 branches in semi-urban and rural areas of Uttar Pradesh as part of the revamping of the organisational structure and processes of the bank.
The Gorakhpur-headquartered lender has appointed Boston Consulting Group (BCG) to guide on the organisational revamp. The bank has 1,982 branches.
According to a communiqué sent to the regional managers of the bank’s 29 regions, excluding Ayodhya, Baroda UP Bank has sought details of these branches that would be rationalised.
The communiqué, reviewed by Business Standard, says BCG, as part of the organisational revamp, has identified branch rationalisation as a key initiative and identified 268 branches for the same — which includes merger and closure.
An email sent by Business Standard seeking comment on branch rationalisation and plans of staff rationalisation remained unanswered until the time of going to press.
The RRBs were established in India under the RRB Act 1976 [23(1)]. In 2019, the government decided to merge Baroda UP Gramin Bank, Purvanchal Bank, and Kashi Gomti Samyut Gramin Bank to form Baroda UP Bank, with BoB as sponsor and head office in Gorakhpur, with effect from April 1, 2020.
As of March 31, 2022, Baroda UP Bank had total deposits of Rs 52,391 crore and advances of Rs 20,218 crore. The bank posted a net profit of Rs 62 crore in 2022-23, down from Rs 91 crore in the previous year. The gross non-performing asset-to-gross advances ratio was 9.78 per cent by the end of March 2022, compared with 8.66 per cent in the previous year. The credit-deposit ratio was only 38.11 per cent. The capital adequacy ratio of the bank was 11.7 per cent in March 2022, against the regulatory requirement of 9 per cent.
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By the end of March 2022, there were 43 RRBs sponsored by 12 scheduled commercial banks (SCBs), with 21,892 branches and operations extending to 297 million deposit accounts and 27 million loan accounts in 26 states and three Union Territories of Puducherry, Jammu & Kashmir, and Ladakh.
Ninety-two per cent of RRB branches were in rural/semi-urban areas. The southern region had the highest number of RRBs, followed by the eastern region.
After two consecutive years of reporting losses in 2018-19 and 2019-20, RRBs turned the corner in 2020-21 and posted net profit, which further improved in 2021-22 (FY22).
Interestingly, at the end of March 2022, RRBs held the highest share of low-cost current account savings account deposits, at 54.5 per cent of total deposits, amongst all categories of SCBs.
RRBs are mandated to lend 75 per cent of their adjusted net bank credit from the previous year to the priority sector. In FY22, except two RRBs, the rest exceeded their targets by lending over 90 per cent to the priority sector, of which close to 70 per cent was for agriculture and 11.5 per cent for micro, small, and medium enterprises, according to the Reserve Bank of India data.
