Two major bank unions have sought the merger of 43 Regional Rural Banks (RRBs) with 12 scheduled commercial banks (sponsor banks) for improving the operational efficiency and viability of the banking sector.
Competition amongst PSBs and RRBs are leading to a waste of scarce financial resources for offering same type of services to few select customers in rural areas, said the officials of All India Bank Officers’ Confederation (AIBOC) and All India Bank Employees Association (AIBEA) in a statement.
RRBs are not in a position nor authorised in certain cases to offer all the modern banking products. Thus, merger of RRBs with Sponsor Banks will ensure delivery of uniform product range to the entire clientele ensuring accelerated growth of the rural economy and priority sector lending, they pointed out.
Assuming that the RRBs are following BASEL I norms for determining their Capital Adequacy, AIBEA General Secretary C.H. Venkatachalam said globally the banking system is gradually shifting to BASEL III norms of provisioning requiring infusion of further core capital.
The merged entity will be able to access the capital market reducing its dependence on the budgetary support, which will be beneficial for fiscal management of the Government.