Government Consolidates RRBs from 196 to 28 under ‘One State-One RRB’ Policy

The Indian government has advanced rural banking reform by reducing the number of Regional Rural Banks (RRBs) from 196 to 28. This strategic consolidation, under the 'One State-One RRB' approach, aims to strengthen financial resilience, improve service quality, cut costs, and enhance operational efficiency.

Massive RRB Consolidation 

The RRB consolidation programme, active since FY 2005-06, has now entered its 4th phase. From an initial 196 RRBs, the government has steadily reduced the number through mergers based on sponsor banks and geographic alignment. Effective May 1, 2025, only 28 RRBs now operate across 26 States and 2 Union Territories. This consolidation enables capital enhancement, streamlined management and cost savings due to reduced administrative overlaps.

Financial Impact Backed by RBI and NABARD Studies

Studies by NABARD and published reports from RBI confirm that past mergers led to better profitability and lower losses. Data shows improved viability, a drop in net losses as a % of assets, and an increase in leverage and capital reserves. Weaker banks were strengthened through capital infusion, resulting in sustainable financial health of the merged entities.

Technology and Customer Experience at Core

With larger scale and shared infrastructure, RRBs are now able to invest in modern technology. This shift allows for digitised banking, faster service delivery, and better customer support, including new call centres and SMS-based communication to update rural customers about the transition.

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Structured Oversight and Employee Safeguard

The Government formed a National Level Project Monitoring Unit (NLPMU) and State Level Monitoring Committees (SLMCs) to steer implementation. NABARD also issued a Standard Operating Procedure detailing policies on employee seniority and fair remuneration retention to ensure seamless workforce integration.

Conclusion

The Government’s RRB consolidation has significantly restructured rural banking by streamlining operations under a unified policy. The move has not only improved financial performance but also promises better banking infrastructure and customer experience for rural India.

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