AIBOC, AIBEA call for merger of RRBs with Sponsor Banks to boost rural economy

Srinagar, June 27: In a significant move aimed at transforming India's rural banking landscape, the All India Bank Officers' Confederation (AIBOC) and All India Bank Employees Association (AIBEA) have jointly petitioned the Finance Ministry to merge Regional Rural Banks (RRBs) with their respective sponsor banks. This proposal, representing the collective voice of over 6 lakh bank employees, seeks to enhance the efficiency and viability of the banking sector, particularly in rural areas.

The unions argue that the merger would address several critical challenges currently faced by RRBs. These include difficulties in meeting capital adequacy norms, operational inefficiencies due to dual control by NABARD and sponsor banks, and limitations in offering modern banking products to rural customers.

According to unions, Currently, there are 43 RRBs sponsored by 12 scheduled commercial banks, operating through approximately 22,000 branches. These RRBs serve about 30 crore deposit accounts and 3 crore loan accounts across 702 districts, with 92% of their branches located in rural and semi-urban areas.

A key concern highlighted by the unions is the inadequate capital infusion for RRBs. Despite a recent government decision to infuse Rs. 10,890 crores in the financial year 2021-22, around 16 RRBs still struggle with Capital to Risk-Weighted Assets Ratio (CRAR) either negative or below the mandatory 9%. The unions believe that merging RRBs with sponsor banks would allow the merged entities to access capital markets, reducing dependence on budgetary support.

The proposal also aims to address technological disparities. While RRBs are currently upgrading their technological platforms, a merger would facilitate a seamless transition to advanced banking technologies used by sponsor banks.

Furthermore, the unions argue that the merger would streamline human resources, addressing staff shortages in both RRBs and sponsor banks while updating the skills of RRB employees to modern banking practices.

The AIBOC and AIBEA emphasize that this merger would combine the financial strength of sponsor banks with the rural outreach of RRBs. They believe this would lead to a more efficient credit delivery system, arrest the declining growth in CASA deposits, and ultimately benefit the entire rural population.