Finance ministry intensifies efforts to merge regional rural banks in states

Despite heavy resistance from unions, the finance ministry has intensified its efforts to merge regional rural banks (RRBs) within a state. The ministry has sought consent from state government of Tamil Nadu to merge two RRBs sponsored by Indian Overseas Bank and Indian Bank.

Also, to expedite the matter, it has directed the sponsor-banks to pursue the case of obtaining the state government's approval.

Consent of the state is necessary as it owns 15% stake in RRBs, while 35% is owned by the sponsor-banks and 50% by the Centre. Industry sources said the ministry is seeing the TN exercise as a test case before merging RRBs. In this case, Indian Overseas Bank will acquire Indian Bank's stake in the RRB based in Tamil Nadu.

In a parallel development, the ministry has also asked sponsor-banks to transfer 20% of their staff to the RRBs and vice-versa.

Source: EconomicTimes