Finance Ministry to Review RRB Performance After Latest Amalgamation

The Ministry of Finance is set to hold a review meeting with senior officials from public sector banks and Regional Rural Banks to evaluate progress after the most recent consolidation exercise. 

The session will focus on financial performance, lending priorities and operational outcomes as RRBs adapt to a reduced network structure designed to improve efficiency and stability.

Review Meeting Scheduled for 30 January

A high-level meeting has been planned for 30 January to assess the functioning of Regional Rural Banks after the latest phase of consolidation. T

he discussion will be led by the Secretary of the Department of Financial Services and is expected to include participation from senior representatives of NABARD, SIDBI and the Reserve Bank of India.

This will be the first major review session since the fourth phase of RRB amalgamation came into effect on 1 May, which reduced the number of RRBs from 43 to 28.

Focus Areas of the Review

The meeting is expected to examine the financial position of RRBs following the restructuring exercise. 

Progress in priority sector lending and the implementation of government-backed financial schemes will also be part of the agenda.

In addition, operational efficiency and cost management outcomes arising from the amalgamation process are likely to be discussed.

Consolidation Phases Over the Years

The RRB consolidation programme has progressed in multiple stages. The number of RRBs was reduced from 196 to 82 during the first phase between FY2006 and FY2010. The second phase brought the count down to 56 between FY2013 and FY2015.

A third phase later reduced the number to 43, followed by the recent fourth phase that lowered it further to 28.

One outcome of the latest restructuring has been the creation of a single state-owned RRB through the merger of 15 RRBs across 11 states, aimed at improving scale and operational efficiency.

Financial and Asset Quality Indicators

Published data indicate that the gross non-performing asset ratio of RRBs declined to 5.4% in March 2025 from 10.8% in March 2019. Provision coverage has strengthened, rising to 65.1% from 40% over the same period.

Capital adequacy has also improved, with the Capital to Risk-Weighted Assets Ratio recorded at 14.4% as of March 2025, reflecting enhanced balance sheet resilience.

Ownership Structure of RRBs

Regional Rural Banks were established under legislation enacted in 1976 to provide credit and banking services to rural communities, including small farmers, agricultural workers and artisans.

Amendments introduced in 2015 allowed RRBs to raise capital from sources beyond the central government, state governments and sponsor banks. 

Currently, the central government holds 50% ownership in RRBs, sponsor banks hold 35%, and state governments account for the remaining 15%. 

Regulatory provisions require combined central and sponsor bank ownership to remain above 51%, even in the event of stake dilution.

Read More: RBI to Roll Out New Integrated Ombudsman Scheme From July 1, 2026: What Bank Customers Should Know.

Conclusion

The upcoming review meeting reflects continued oversight of Regional Rural Banks as they transition into a consolidated structure. Discussions are expected to centre on financial health, lending performance and governance outcomes. 

As RRBs adjust to the latest amalgamation phase, their operational effectiveness and contribution to rural credit delivery will remain key areas of policy attention.

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