In News:

The Government of India, through the Ministry of Finance, has implemented the "One State, One RRB" policy effective from May 1, 2025, aimed at consolidating 26 Regional Rural Banks (RRBs) across 10 states and 1 Union Territory, thereby reducing the total number of RRBs to 28. This move follows the recommendation of the Dr. Vyas Committee and is intended to enhance the performance and outreach of RRBs.

Objectives of the Policy

• Improve operational efficiency and governance.
• Rationalize costs and optimize resources (human and technological).
• Eliminate intra-state competition among sponsor banks.
• Promote uniform service delivery through technological integration.

About Regional Rural Banks (RRBs)

• Established: 1975 under the Regional Rural Banks Act, 1976.
• Recommended by: Narasimham Committee (1975).
• Ownership Pattern:
  • Government of India – 50%
  • State Government – 15%
  • Sponsor Bank – 35%

Regulatory Structure

• Regulated by: Reserve Bank of India (RBI)
• Supervised by: NABARD (National Bank for Agriculture and Rural Development)

Role and Objectives

• Provide institutional credit to rural India.
• Support priority sectors like agriculture, MSMEs, and rural artisans.
• Ensure financial inclusion among farmers, labourers, and small entrepreneurs.

Impact of the Reform

• Operational Scale: Enhanced credit delivery across wider geographies.
• Technological Standardization: Easier integration of IT infrastructure.
• Unified Governance: One sponsor bank per state improves accountability.
• Performance: RRBs recorded an all-time high net profit of ?7,571 crore in FY 2023–24.
• Asset Quality: GNPA (Gross Non-Performing Assets) stood at 6.1%, the lowest in a decade.