The “One State, One RRB” policy by the Government of India aims to merge multiple Regional Rural Banks within each state into a single entity, enhancing efficiency, reducing costs, and improving rural credit delivery and financial inclusion
Gopabandhu Mohapatra
The establishment of Regional Rural Bank (RRB) was based upon the report of the Working Group Committee headed by Shri M. Narsimha. The committee recommended the establishment of a new type of banking institution to supplement the efforts of commercial and cooperative banking institutions in the rural sector to develop the grassroots level economy.
Based on Committee Report (1975) to bridge rural credit gaps and strengthen institutional lending in rural India. Regional Rural Banks (RRBs), since then was supervised by National Bank for Agriculture and Rural Development (NABARD). Objective of RRBs was to promote credit access in rural areas for agriculture, trade, and services. Provide banking services to small and marginal farmers, artisans, labourers, and small entrepreneurs. Focus on priority sectors such as agriculture and MSMEs.
The first RRB “PrathamaGrameen Bank” opened on October 2, 1975, in Moradabad was sponsored by Syndicate Bank. Later RRB Act of 1976 was passed, expanding their network in mostly lead districts, maintaining a lean structure. The onus of management of RRBs rested on the sponsoring banks, the stake is well diversified. Central Government, State, and sponsored banks hold the stake in the proportion of 50:15:35. The three stakeholders work in tandem to nurture RRBs to enable them to serve the rural economy.
Initially, 6 RRBs started with 17 branches, and reached the strength of 196 in 1990. By 2016,there were 56 RRBs, covering 525 districts and 14,494 branches. The number of RRBs came down sharply to 43 by 2020 through mergers.As on 31 March 2023, the 43 RRBs sponsored by 12 Scheduled Commercial Banks have a network of 21,995 branches with operations extending to 30.53 crore deposit accounts and 2.90 crore loan accounts in 26 States and 3 Union Territories (Puducherry, Jammu & Kashmir and Ladakh).
RRBs, as an integral part of the district development plan, focus on providing micro low-ticket loans to farmers for crops, irrigation, sowing, and transportation to mandisamitis. Over a period of time, the weaker section of the society has rightly evolved into a larger target group of beneficiaries. During the last fifty years, RRBs played a critical role in providing banking services to the underserved segments of the economy. RRBs were active in opening bank accounts under PMJDY and used the Jan Dhan, Aadhaar, and Mobile (JAM) trinity to foster financial inclusion.
The Regional Rural Banks (RRBs) have been transforming in terms of number, size, and geographical affinity, but did not alter their mandate. They serve to resurrect the rural economy with a local feel, language, and cultural touch by connecting masses with the formal banking system. In the last five decades, RRBs have become a familiar name in rural households. RRBs integrate with local customers by adopting customs and practices, joining social gatherings, and remaining a part of the society.
As per study, the performance highlights of RRBs have displayed the highest ever consolidated net profit of Rs. 4,974 crores during FY 2022-23, and their consolidated Capital to Risk Weighted Assets Ratio (CRAR) was at an all-time high of 13.43 percent as on 31 March 2023. The asset quality measured by GNPA (Gross Non-Performing Assets) at 7.28 percent was the lowest in the previous 7 years. Credit expansion led to an increase in the consolidated CD ratio to 67.50 percent, which was the highest in over 15 years. Further, the latest data indicated that RRBs posted a consolidated net profit of Rs. 7,796 crores in FY24, brightening prospects for some RRBs to tap the capital market, including through an initial public offering (IPO). Improved performance by some RRBs may empower them to tap the capital market.
Since their establishment in 1976, Regional Rural Banks (RRBs) have undergone significant growth and restructuring, marked by initial expansion, subsequent mergers, and a recent shift towards “One State, One RRB” consolidation. This consolidation efforts continued and by 2023-2024, with the “One State, One RRB” initiative, lead to further mergers. As of April 16, 2025, 43 RRBs operate across 26 states and 3 Union Territories, covering 700 districts. The “One State, One RRB” initiative is expected to reduce the number of RRBs further, with 28 RRBs covering 700 districts with more than 22,000 branches
Consolidation of the RRBs is a strategic move to improve the financial stability as well as the ability to serve rural India. The government is implementing a policy of consolidating RRBs to create larger, more efficient entities, ultimately aiming for “One State, One RRB”.
Recently the Government of India decided to consolidate 43 Regional Rural Banks (RRBs) into 28 banks based on ‘One State – One RRB’ policy. This fourth round of consolidation will reduce the number of RRBs from 43 to 28, effective from May 1, 2026. The consolidation is expected to improve operational efficiency, reduce costs, and strengthen the financial health of RRBs.
The present size of 43 RRBs will be merged into a 28-strong network of RRBs spread across 26 states and 2 union territories under the policy of ‘One State-One RRB’. The compact set of stronger RRBs regulated by RBI and supervised by NABARD is expected to play a more focused role in further transforming the hinterland. The number of RRBs expanded, truncated, and merged at various points in time to improve their efficiency and outreach.
A reform initiative of the Department of Financial Services aimed at consolidating RRBs within a state into a single entity.The consolidation processwas initiated in the year 2005.The Ministry of Finance has notified the amalgamation of 26 Regional Rural Banks (RRBs) across 10 states and 1 union territory under the “One State, One RRB” policy, effective from May 1, 2025, reducing the total number of RRBs to 28.
1.Chaitanya Godavari Grameena Bank, Andhra PragathiGrameena Bank, SaptagiriGrameena Bank and Andhra Pradesh GrameenaVikas in the State of Andhra Pradeshwill be amalgamated into a single Regional Rural Bank, which shall be called as Andhra Pradesh Grameena Bank with its head office at Amravati under the sponsorship of Union Bank of India.
2. Dakshin Bihar Gramin Bank and Uttar Bihar Gramin Bank in the State of Bihar will be amalgamated into a single Regional Rural Bank, which shall be called as Bihar Gramin Bankwith its head office at Patna under the sponsorship of Punjab National Bank.
3.Baroda Gujarat Gramin Bank and SaurashtraGramin Bank in the State of Gujarat will be amalgamated into a single Regional Rural Bank, which shall be called as Gujarat Gramin Bank with its head office at Vadodara under the sponsorship of Bank of Baroda.
4.J & K Grameen Bank and EllaquaiDehati Bank in the Union Territory of Jammu and Kashmir will be amalgamated into a single Regional Rural Bank which shall be called as Jammu and Kashmir Grameen Bank with its head office at Jammu under the sponsorship of The Jammu and Kashmir Bank Ltd.
5.Karnataka VikasGrameena Bank and Karnataka Gramin Bank in the State of Karnataka will be amalgamated into a single Regional Rural Bank, which shall be called as Karnataka Grameena Bank with its head office at Ballari under the sponsorship of Canara Bank.
6.Madhya Pradesh Gramin Bank and MadhyanchalGramin Bank in the State of Madhya Pradesh will be amalgamated into a single Regional Rural Bank, which shall be called as Madhya Pradesh Gramin Bankwith its head office at Indore under the sponsorship of Bank of India.
7.Maharashtra Gramin Bank and VidharbhaKonkanGramin Bank will be amalgamated into a single Regional Rural Bank, which shall be called as Maharashtra GraminBank with its head office at ChhatrapatiSambhajinagar under the sponsorship of Bank of Maharashtra.
8.Odisha Gramya Bank and UtkalGrameen Bank in the State of Odisha will be amalgamated into a single Regional Rural Bank, which shall be called as Odisha Grameen Bank with its head office at Bhubaneswar under the *sponsorship of Indian Overseas Bank.
9.Rajasthan MarudharaGramin Bank and Baroda Rajasthan KshetriyaGramin Bank in the State of Rajasthan will be amalgamated into a single Regional Rural Bank, which shall be called as Rajasthan Gramin Bank with its head office at Jaipur under the sponsorship of State Bank of India.
10.Baroda U.P. Bank, Aryavart Bank and Prathama U.P. Gramin Bank in the State of Uttar Pradesh will be amalgamated into a single Regional Rural Bank, which shall be called as Uttar Pradesh GraminBank with its head office at Lucknow under the sponsorship of Bank of Baroda.
11. BangiyaGraminVikash, PaschimBangaGramin Bank and UttarbangaKshetriyaGramin Bank in the State of West Bengal will be amalgamated into a single Regional Rural Bank, which shall be called as West Bengal Gramin Bank with its head office at Kolkata under the sponsorship of Punjab National Bank.
RRBs are well poised to become stronger with the merger based on the policy ‘One State-One RRB’. One RRB in each state, will open up opportunities to operate in the entire state and coordinate with the state-level bankers committee as one of the key stakeholders in the banking ecosystem of the state. The visionary policy step to limit one RRB in one state will prevent the overlapping clout of different sponsoring banks in the state. A unitary control of one sponsoring bank will be able to shape the RRB into a powerful banking institution with technology and manpower support to make it more effective. Structurally, this is also the best combination to have one RRB in each state for integrated involvement in the development of the rural economy.
This growth will be followed by restructuring and consolidation, leading to a reduction in the number of RRBs through mergers. The latest phase, “One State, One RRB,” aims to further improve efficiency and reduce duplication. The merger of multiple Regional Rural Banks into unified entities will mark a pivotal reform in India’s rural banking structure. By reducing fragmentation and fostering scale, the move is expected to bring long-term benefits to both the banking sector and rural customers.
(Author is a Former Banker. Views expressed are personal)
