The finance ministry has initiated a process that involves cross merger of regional rural banks (RRBs) in a state, cutting across sponsor banks. The move is designed to achieve uniformity in terms of branch network. At present, there are 82 RRBs in the country. If the merger plan goes through, the number will be whittled to 46. Sources said a proposal to merge RRBs was recently forwarded by the department of financial services in the finance ministry to the chief executive officers of the sponsor banks (the PSU banks). This is the second such merger process initiated by the Centre. In 2005-08, an amalgamation saw the number of RRBs come down to 82 from 196. Most of the RRBs merged last time round operated under the same sponsored bank in a particular state. The government is now considering cross-mergers of RRBs that belong to two different sponsor banks in a state. “The basic idea is to reduce their number so that branch uniformity is achieved. At present, there are some RRBs that have more than 400 branches; others have far fewer branches. The government wants to ensure number of branches under an RRB at around 400 branches,” sources said. The process extends to around 20 states in the country. In Bengal, the plan is to merge the Uttar Banga Kshetriya Gramin Bank (sponsored by Central Bank of India) and the Paschim Banga Gramin Bank (where Uco Bank is the sponsor bank). The new merger proposal has, however, met with opposition. The All India RRB Officers’ Federation affiliated to the AIBOC has slammed the idea. It feels that a cross-merger will not only lead to problems because of technology mismatches but can also spark cultural integration and other operational issues. S.K. Bhattacharjee, general secretary of the All India RRB Officers Federation, said after the earlier round of mergers, sponsor banks had made huge investments to bring the amalgamated RRBs into their core banking solutions (CBS) platform. “There are more than 26,000 branches that have become CBS compliant. It is possible that a cross-merger will bring two banks, which belong to different technology platforms. It is also feared that a strong RRB may be merged with another entity which is financially weak,” Bhattacharjee said. Bhattacharjee added that in considering the present merger proposal, the financial position of the RRBs, their geographical location or other synergies had not been considered. The federation is also opposing the plan to merge the two RRBs in Bengal as it feels that it does not contain any synergies and isn’t financially advisable. According to the federation, while the Uttar Banga Kshetriya Gramin Bank is a profitable RRB, the Paschim Banga Gramin Bank has reported losses.
The Telegraph
