The National Bank for Agriculture and Rural Development (NABARD) is setting a trend of consolidation in the rural financial institutions space this fiscal and the number of regional rural banks (RRBs) could decrease to 38 from 45 at present.
Moreover, some States already initiated the merger of district central co-operative banks (DCCBs) with state co-operative banks.
The consolidation in the rural financial institutions space is being driven by the need for regular investment in technology and limitations in measuring and enforcing managerial/governance norms, said Harsh Kumar Bhanwala, Chairman of NABARD.
The number of RRBs decreased from 56 to 45 due to amalgamation in FY2019. NABARD has also suggested that the State governments to consider merging district central co-operative banks with State co-operative banks.
“Size limitation is the major risks for DCCBs. If the area is hit by a natural calamity, DCCBs’ entire lending portfolio could be affected as the area of operation is comparatively small. These banks are at the condition of massive risk on that account,” Bhanwala added.
According to NABARD’s FY2018 annual report, there are total 34 State co-operative banks and 364 DCCBs across the country
Kerala and Punjab –these two state government have initiated moves to amalgamate their DCCBs with State co-operative banks.
