Amalgamation will bring about better efficiency of scale, higher productivity, improved financial health of the Regional Rural Banks (RRBs) and greater credit flow to rural areas, Minister of State for Finance Anurag Thakur told the Lok Sabha on Tuesday.
In a written reply, Thakur said that the Central government had initiated the process of structural consolidation of RRBs in 2004-05 by amalgamating RRBs of the same sponsor bank within a State.
"The amalgamation process brought down the number of RRBs from 196 to 82. With a view to enabling RRBs to minimise their overhead expenses, optimise the use of technology, enhance the capital base and area of operation and increase their exposure, the process of amalgamation of RRBs was again carried out in the year 2011," he said.
"During 2011-2014, the number of RRBs was brought down to 56 from 82. In 2018-19, the amalgamation of RRBs has been carried out based on a roadmap proposed by NABARD and consultation with respective sponsor banks and state governments," he said.
"Accordingly, the number of RRBs has been brought down to 45 from 56, as on 01.04.2019. It is expected that amalgamation will bring about better efficiency of scale, higher productivity, the improved financial health of the RRBs and greater credit flow to rural areas," the minister said.
Thakur said that the government has been receiving various representations from time to time regarding the formation of the National Rural Bank
"The government examined the proposal in consultation with the State governments and sponsor banks and in the Action Taken Report on the recommendations in the aforesaid report of Parliamentary Standing Committee on Finance (2003), Government," said Thakur.
The minister further said that recapitalisation support is provided to RRBs to augment their capital so as to comply with regulatory capital requirements.
"Periodic review of the financial performance of RRBs, including business diversifications, profit planning, revenue management, and NPA management through the conduct of national-level meetings by NABARD and through Empowered Committee (EC) meetings at the state level," he said.
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