N-E states fear loss of stake after regional rural banks' merger

SBI holds a 35% stake, the Centre 50%, and the respective state governments 15% in each of the five RRBs in the North East.

As State Bank of India (SBI) pitches for merger of five regional rural banks (RRBs) in the North-East, state governments of the five states are not on the same page.  This is the first time an inter-state merger of RRBs is being proposed. So far, merger of RRBs has been limited to within a state.

The merger requires approval by the state and central governments. SBI holds a 35 per cent stake, the Centre 50 per cent, and the respective state governments 15 per cent in each of the five RRBs in the North-East. At a recent meeting with officials of the Mizoram Rural Bank and that of the finance department of the Mizoram government, the state raised issues like dividend to the state from the 15 per cent share in the bank and concerns regarding the churn in human resources post merger. The government of Mizoram also pointed out that although the capital base of the merged RRB would be enhanced substantially, there was no guarantee that in future the proposed entity would not suffer losses due to rising non-performing assets, according to documents on the minutes of the meeting.

“There are several concerns regarding human resources. It was observed that the locally recruited staff would not be posted outside the state. North-East should not be viewed as a culturally homogenous area.

An inter-state merger would also require re-fixing of the seniority among staff, which may not be a practical exercise,” according to the minutes of the meeting document.

The five RRBs that are proposed to be merged include Arunachal Pradesh Rural Bank, Meghalaya Rural Bank, Mizoram Rural Bank, Nagaland Rural Bank and Langpi Dehangi Rural Bank (based in Assam). Apart from Mizoram, other state governments have also been reluctant in pursuing the merger, except for Nagaland, as they are apprehensive of their shareholding post-merger.  Of the five banks to be merged, Mizoram Rural Bank is the largest in terms of  total advances and deposits, which stood at Rs 756 crore and Rs 1,492 crore, respectively, on March 31, 2015.