AIBEA pitches for merger of weak regional rural banks with sponsor banks
Monitoring would be much more effective since they would become part of the bank and come under the direct control of the management of the sponsor banks.
New Delhi: Bank union AIBEA on Monday said the government should consider merger of weak Regional Rural Banks (RRBs) with their sponsor banks as part of restructuring exercise.
In a letter to Finance Minister Nirmala Sitharaman, the All India Bank Employees’ Association (AIBEA) said it is learnt that the government is considering further reforms in RRBs to make them more viable.
“We suggest that merging these RRBs with the sponsor banks would be a better proposition since this will add to the rural network of the sponsor banks and at the same time eliminate the weaknesses which the RRBs are presently suffering from,” it said.
Monitoring would be much more effective since they would become part of the bank and come under the direct control of the management of the sponsor banks, AIBEA general secretary C H Vekatachalam said.
These banks were formed under the RRB Act, 1976 with an objective to provide credit and other facilities to small farmers, agricultural labourers, and artisans in rural areas.
As per the Act, the shareholding among the Centre, concerned state governments and the sponsor or promoter banks is in the ratio of 50:15:35, respectively. After the central government, the sponsored bank is the largest shareholder with 35 per cent stake.
To begin with there were 196 RRBs, which over a period of time have been consolidated into 43.
Even though the objectives of the RRBs have been laudable, the very nature of the business being carried on by the RRBs make them fragile and vulnerable, Vekatachalam said.
In this background, he said, there have been many efforts to restructure the RRBs to make them strong and vibrant but the results have not been that encouraging because of the intrinsic reasons and they are bound to be so.
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