To improve the operational viability of Regional Rural Banks (RRBs) and harness economies of scale, the Government of India initiated structural consolidation of RRBs in the financial year 2005-06.

During Phase I (2005-10), the number of RRBs was reduced from 196 to 82 by amalgamating RRBs sponsored by the same bank within a state. Phase II (2012-14) further reduced the number from 82 to 56 by amalgamating RRBs across different sponsor banks operating in geographically contiguous areas within a state. Phase III began in 2019, focusing on merging weaker RRBs with stronger ones, bringing the total number down from 56 to 43 by March 2021.

A 2021 NABARD study on the financial impact of these amalgamations showed improved viability and financial performance for RRBs. The Reserve Bank of India (RBI) published these findings in its Report on Trend and Progress of Banking in India (2020-21). The study revealed a continuous rise in the share of profitable and sustainable RRBs and a reduction in accumulated losses as a percentage of total assets. Improved profitability, coupled with capital infusion in weaker banks, boosted leverage and reserves-to-capital ratios.

Guided by the principle of ‘One State-One RRB’, the government has proceeded with Phase IV amalgamation to achieve scale efficiencies and cost rationalisation. As of 1 May 2025, the number of RRBs has been further reduced from 43 to 28 across 26 states and two union territories, as per the government notification dated 5 April 2025.

This consolidation has resulted in state-level RRBs with contiguous operational areas, simplifying management and improving service delivery. The merged entities have strengthened capital bases, enhancing financial stability and resilience. By eliminating administrative redundancies, amalgamation is expected to generate cost savings. Additionally, these consolidated banks can invest in advanced technology platforms, boosting operational efficiency and customer service.

The amalgamation was implemented based on audited financials as of 30 April 2025, with effect from 1 May 2025. The government has established a State Level Monitoring Committee (SLMC) and a National Level Project Monitoring Unit (NLPMU) to oversee the process.

NABARD has issued a National Level Standard Operating Procedure (SOP), providing detailed guidelines for the formation of Amalgamation Project Management Units (APMU), Steering Committees, and Functional Committees in each Anchor/Transferee RRB. These bodies finalise harmonised policies and manage day-to-day integration.

The government notification also ensures protection of existing employees’ remuneration and service conditions. Inter-se seniority of officers and staff follows NABARD’s SOP. To safeguard rural customers’ interests, NLPMU has directed RRBs to widely publicise the amalgamation through electronic and print media, SMS alerts, and branch-level awareness meetings. RRBs are also required to establish call centres to address customer grievances. According to NABARD, all branches remain operational under the new entities, with migration of customer accounts, deposits, and loans progressing without major disruptions.