The purpose of establishing rural banks (Regional Rural Banks – RRBS) in India was to provide financial services to small farmers, agricultural laborers and artisans in rural areas. But recently, the government has planned to close 15 rural banks or merge them with other banks.
This decision raises many questions: will it be beneficial for rural communities? And what will the public do now? In this article, we will discuss this subject in detail.
Why is the Government Closing Gramin Banks?
The government has decided to close rural banks under the “One State, One RRB” policy. Its main objective is to increase operational efficiency and cost rationalization.
Key reasons for closure:
- Operational Efficiency: Creating large and strong institutions by merging small banks.
- Cost Reduction: Reducing administrative expenses.
- Technological Advancement: Promoting digital banking and improving the old technical structure.
- Avoiding Competition: Preventing unnecessary competition between public sector banks.
Overview of the policy (One State, One RRB)
| Aspect of policy | Description |
| Objective | Increasing the efficiency of rural banks. |
| Beginning date | 1 May, 2025 |
| Reduction in number | 28 banks reduced from 43 to 28. |
| Affected state | Andhra Pradesh, Uttar Pradesh, Bihar, Rajasthan etc. |
| key benefits | Cost reduction and better service. |
| New bank headquarters | New headquarters established in various states. |
Impact of closure of rural banks
Positive effects:
- Better services: Large banks can provide more resources and better technology.
- Extension of digital banking: Digital services will be promoted in rural areas.
- Economic stability: The merger will strengthen the financial position of banks.
Negative effects:
- Lack of access to rural areas: Bank branches may be closed in many remote areas.
- Effect on small businesses: Small traders may have difficulty due to reduced access to cash.
- Impact on disabled and elderly people: Digital banking is not convenient for all.
Steps taken by the government
The government has taken some measures to reduce the problems caused by the closure of rural banks:
- Construction of Banking Hubs: Banking hubs will be built where branches are closing.
- Digital Banking Training: Scheme to teach digital banking to people in rural areas.
- Capital Infusion: Plan to insert capital up to ₹ 2000 crore in new banks.
Details of merger in major states
Andhra Pradesh:
Four banks – Chaitanya Godavari Gramin Bank, Andhra Pragati Gramin Bank, Saptagiri Gramin Bank and Andhra Pradesh Rural Development Bank – were merged and “Andhra Pradesh Gramin Bank” was made.
Uttar Pradesh:
Baroda UP Bank, Aryavarta Bank and First UP Gramin Bank were merged and “Uttar Pradesh Gramin Bank” was formed.
Rajasthan:
Rajasthan Marudhara Gramin Bank and Baroda Rajasthan Regional Rural Bank were merged and “Rajasthan Gramin Bank” was made.
Other states:
Similar merger was also done in states like Bihar, Gujarat, West Bengal, Karnataka etc.
What will the public do now?
Option:
- Adopting Digital Banking: The public will have to make a habit of transaction through digital mediums.
- Use of Banking Hubs: Use the hub made there where branches are closed.
- Dependence on rural cooperative societies: Cooperatives can be an option for small loans.
Suggestion:
- The government should ensure that at least one digital service center is available in every village.
- Special training programs should be organized for elderly and disabled persons.
conclusion
The government’s decision to close or merge 15 rural banks by the government is a major step. Its purpose is to make financial services more efficient, but its effect will depend on the public how they adopt this change.
Disclaimer
The scheme is real and will be implemented from May 1, 2025. However, its long -term effects can be evaluated over time. The public should be prepared for the use of digital services.
