Context:

• The Central Government has implemented the "One State, One RRB" policy from May 1, 2025.
• Under this policy, 43 Regional Rural Banks (RRBs) have been merged into 28 banks.
• This move aims to enhance operational efficiency and ensure financial stability.

Key Points:

• Each state will now have only one RRB, sponsored by a major Public Sector Bank.
• The policy is expected to lead to:

• • Improved credit flow to rural areas
  • Reduction in operational costs
  • Better financial health of banks

Major Highlights:

• Coverage:

           Includes RRBs in 11 states and union territories –

           Andhra Pradesh, Uttar Pradesh, West Bengal, Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh,                 Maharashtra, Odisha, and Rajasthan.

• Branches:

          Over 22,000 branches, with 92% located in rural and semi-urban areas, covering around 700 districts.

• Capital Base:

          Each merged bank now has an authorized capital of ₹2,000 crore.

Example – Uttar Pradesh:

• Merged Banks:

          Baroda UP Bank, Aryavart Bank, and Prathama UP Gramin Bank merged into Uttar Pradesh Gramin Bank.

• Headquarters:

          Located in Lucknow, sponsored by Bank of Baroda.

Benefits:

• Increased Rural Lending:

          Higher capital base will enable greater support to rural borrowers.

• State-specific Focus:

           Each state-specific RRB can now address local financial challenges more efficiently.

Historical Background:

• 2004–05:

          The RRB merger process began, consolidating 196 RRBs into 82.

• 2015:

          The RRB Amendment Act came into effect, increasing the minimum authorized capital from ₹5 crore to ₹200 crore.

• 2025:

          Final phase of consolidation – 43 RRBs merged into 28 banks.

• Note:

          The consolidation process was initiated in 2005 based on the recommendations of the Dr. Vyas Committee.

About Regional Rural Banks (RRBs):

• Established: In 1975, under the Regional Rural Banks Act, 1976.
• Recommendation: Based on the Narasimham Committee Report (1975).
• Objective:

          To bridge the rural credit gap and strengthen institutional rural finance in India.

• Regulation: By the Reserve Bank of India (RBI).
• Supervision: By the National Bank for Agriculture and Rural Development (NABARD).

Ownership Structure:

• Government of India: 50%
• State Government: 15%
• Sponsor Bank: 35%