Bank unions ask finance minister to merge regional rural banks with sponsor banks

Two bank unions - AIBOC and AIBEA have demanded the merger of Regional Rural Banks (RRBs) with their respective Sponsor Banks to ensure overall efficiency and viability of the banking sector.

Why are the unions demanding merger of RRBs with sponsor banks?

It is imperative that for ensuring the desired level of operational efficiency, duality of control over RRBs should end and they should be brought under operational and regulatory framework as being practised by the sponsored banks and the same can be ensured by the merger of these two entities, according to a letter addressed to Finance Minister Nirmala Sitharaman.

The RRBs are asked to upgrade their technological platform to a higher version as is prevailing in the sponsored banks. The work of technological upgradation is underway in all the 43 RRBs.

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The merger of RRBs with their sponsor banks will be a seamless technological transition, the All India Bank Officers' Confederation (AIBOC) and All India Bank Employees Association (AIBEA) said in a letter addressed to the Finance Minister.

The merger of RRBs with their sponsor banks will update the skill of RRB employees to modern banking practices and effectively address the issues of staff shortages in RRBs and the sponsored banks, it added.

Such integration in HR will also be seamless as the salary structures and other perquisites enjoyed by the officers and employees of RRBs are broadly the same, and they are also exposed to the work culture of their respective sponsor banks for all the operational support extended over the last 45 years, the letter suggested.

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The letter said the proactive step of merging RRBs with their respective sponsor banks will facilitate enhanced supervision, governance and accountability, ensuring greater sustainability in the banking sector.

"The multifarious advantages that follow from the merger of the RRBs with their sponsor banks make us unequivocal in placing our demand for a complete merger of all the 43 RRBs, which will ensure a complete transformation of the rural economy by combining the financial strength of the sponsor bank with the rural outreach of the RRBs," the letter said.

Besides, it said, the merger will help mobilise CASA deposits and a more efficient credit delivery system for the benefit of the entire rural population.

How many regional rural banks are there?

There are now 43 RRBs sponsored by 12 scheduled commercial banks, with around 22,000 branches having about 30 crore deposit accounts and 3 crore loan accounts, covering 702 districts.

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All the Public Sector Banks except Punjab & Sind Bank sponsored one or more RRBs. Jammu & Kashmir Bank is the only private-sector bank to sponsor an RRB. Around 92 per cent of the RRB branches are located in rural and semi-urban areas.

The Centre has a 50 per cent stake in RRBs, while sponsor banks and state governments own 35 per cent and 15 per cent, respectively.