Centre Merges 2 Odisha Rural Banks Under 'One State-One RRB' Plan

Bhubaneswar: The Odisha Gramya Bank and Utkal Grameen Bank will be merged into a single entity from May 1, 2025, under the Government of India’s ‘One State-One RRB’ initiative. This move is part of a broader consolidation plan involving 15 Regional Rural Banks (RRBs) across 11 states, aimed at enhancing operational efficiency and optimizing costs. A formal notification has been issued by the Ministry of Finance in this regard.

According to the gazette notification, RRBs in Odisha, Andhra Pradesh, Uttar Pradesh, West Bengal, Bihar, Gujarat, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, and Rajasthan will each be merged into one bank per state. This marks the fourth phase of RRB consolidation, which will reduce the total number of RRBs from 43 to 28.

The notification cites Section 23A(1) of the Regional Rural Banks Act, 1976, as the legal basis for the mergers, stating that the move is in public interest, and will benefit the regions served as well as the banks themselves.

In Odisha, the Odisha Gramya Bank is sponsored by Indian Overseas Bank, while Utkal Grameen Bank is backed by the State Bank of India. Both banks were established under the RRB Act of 1976 to provide credit and financial services to small farmers, agricultural labourers, and rural artisans.

Post-merger, each consolidated RRB will have an authorized capital of ₹2,000 crore. Ahead of the consolidation, capital infusion had been carried out. In 2021-22, the Centre announced an infusion of ₹5,445 crore over two years to strengthen RRBs' capital base.

Following these measures, the performance of RRBs has significantly improved in 2023-24. The sector reported a record consolidated net profit of ₹7,571 crore and achieved a capital adequacy ratio of 14.2% as of March 31, 2024—its highest ever. Gross Non-Performing Assets (GNPA) dropped to 6.1%, the lowest in a decade. The restructuring of RRBs began in 2004-05, reducing their number from 196 to 43 through three prior phases of amalgamation.

Currently, the Centre holds a 50% stake in each RRB, while sponsor banks and state governments hold 35% and 15% respectively. Even after any dilution of shares, the combined holding of the Centre and sponsoring public sector banks must not fall below 51%, as per amendments to the RRB Act.

As of March 31, 2024, 43 RRBs operate across 26 states and 3 Union Territories, with a branch network of 22,069 spanning 700 districts. The adoption of digital services is also accelerating across RRBs, with an increasing focus on technology-driven customer solutions.