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Monday, December 12, 2011

Govt plans merger of more regional rural banks

Following a move by the Central Government to further amalgamate regional rural banks (RRBs) in the country, employee unions are demanding the formation of a National Rural Bank of India (NRBI), by amalgamating all RRBs and de-linking of RRBs from the sponsor banks.
Ministry view

In a letter dated November 28 to the chairmen of sponsor banks of RRBs, the Department of Financial Services, Ministry of Finance, said that currently there are a large number of RRBs, sponsored by different banks, functioning in a State. It said that many of the RRBs are very small, with network of less than 100 branches.

Unions' take

The letter suggests that geographically contiguous RRBs sponsored by different banks within a State could be amalgamated with single sponsor bank. It has also sought no-objection certificates from the banks for this move.

However, the employees unions want a two-tier structure, such as the one existing in State Bank of India (SBI), and are demanding an NRBI as well.

Explaining this, Mr Vasanth Bannigol, Joint Secretary of the All-India Regional Rural Bank Employees' Association, told Business Line that SBI has a corporate office in Mumbai, and each State has got a local head-office.

National and state levels

“This two-tier system should be implemented in RRBs also. At the national level there should be NRBI, and each State they should have a State-level RRB,” he said.

Substantiating this, he said the RRBs have already grown and have become stronger.

Let the control be there at the national apex organisation.

Stating that there are conflicting interests between the RRBs and sponsor banks, Mr Bannigol said in some places both of them have their branches. Sometimes it becomes difficult to compete in such a situation.

independent entity

“If at all we are independent, then we can take independent decisions and become still stronger.

In Karnataka alone, the business of RRBs is more than Rs 26,000 crore. That being the case we must have independent identity and entity,” he said.

He suggested that the State and the Central Governments be the owners, and the share capital owned by sponsor banks be taken by Nabard.

Credit delivery

Endorsing these views, Mr K. S. Bhat, All-India Secretary, Syndicate Bank Staff Association, said that NRBI will help the Government achieve its agriculture growth and financial inclusion targets, and strengthen the credit delivery system of the country.

Mr Bhat said that MVS Chalapathi Rao Working Group, Vyas Committee, and the Standing Committee on Finance (Thirteenth Lok Sabha) in its 55th report presented to both Houses of Parliament on December 22, 2003, had also recommended setting up an NRBI.


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