SBI seeks merger of 5 rural banks in N-E

Five regional rural banks (RRBs) in the Northeast under the sponsorship of State Bank of India (SBI) are to soon be merged.

The five RRBs are Arunachal Pradesh Rural Bank, Meghalaya Rural Bank, Mizoram Rural Bank, Nagaland Rural Bank and Langpi Dehangi Rural Bank (based in Assam), said a source close to the development.

The proposal was recently made by SBI, which has asked the RRBs to seek board approvals. The merger requires approval by the state and central governments. SBI holds a 35 per cent stake, the Centre 50 per cent, and the respective state government 15 per cent in each of the five RRBs.

SBI could not be reached for comments.

The merged entity would have a deposit base of Rs 3,578 crore, with advances of Rs 1,736 crore. Total net profit of the five banks on March 31, 2015, was Rs 44.52 crore. Of the five, only Nagaland Rural Bank reported losses last financial year.

"At present, the sponsor bank is acting as master, detrimental for the growth of RRBs. Also, three other regional rural banks in the Northeast not under the sponsorship of SBI should be brought into the amalgamation scheme,' said A Sayeed Khan, secretary-general, All India Regional Rural Bank Employees Association. The Reserve Bank of India (RBI) had, in 2001, constituted a committee under the chairmanship of V S Vyas on farm credit, which had examined the relevance of RRBs. A consolidation was initiated on recommendations of the committee in 2005.

In the first phase of amalgamation, RRBs were merged within a state on the basis of their sponsor banks. In the second phase, mergers were initiated across sponsor banks within a state.

As a result of earlier amalgamations, the number of the RRBs was reduced from 196 to 64 as on March 31, 2013, and further to 56 at present, with a network of 20,059 branches covering 644 districts.

Of the five banks to be merged, Mizoram Rural Bank is the largest in terms of loan outstanding, at Rs 203.52 crore as of December 2015. The smallest bank being Nagaland Rural Bank, with dues of about Rs 5.52 crore.

State Bank of India