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No amalgamation of RRBs

The government has put on hold further amalgamation of Regional Rural Banks (RRBs) as it has been found that these banks, which were set up in 1975, to create an alternative channel to the cooperative credit structure and ensure sufficient institutional credit for the rural and agriculture sectors, have been finding it difficult to meet capital adequacy norms. The focus may now be on improving their performance and exploring a new class of investors to raise capital for these. In a communique to the heads of public sector banks, the finance ministry said there was a need to tap other sources of capital for RRBs. No fresh proposal of amalgamation of RRBs should be taken up, it added. Currently, the central and state governments and sponsor banks provide capital to RRBs – the Centre provides 50%, the state governments 15% and the sponsor bank 35%. While the Centre and sponsor banks have been infusing capital, state governments have been found wanting in providing their share. At March-end, 2011, the total number of RRBs was 82; this fell to 64 in March 2013 and 57 in March 2014.

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