State PCS - Madhya Pradesh (MP PCS)

• 03 May 2025

Merger of Banks in Madhya Pradesh

Why in News? 

The Central Government will implement the One State-One RRB policy from 1 May 2025, to improve the quality of rural banking services. 

Key Points 

• About One State-One RRB Policy : 
  • Under this policy, the number of Regional Rural Banks (RRBs) will be reduced from 43 to 28, with one RRB serving all rural areas in each state. 
  • Each new RRB will have an authorised capital of Rs 2,000 crore and operate with improved efficiency, management, and customer service. 
• Objective: 
  • To improve the effectiveness and organization of rural banking services . 
  • Providing integrated services and improved access to customers . 
  • Reduce operating costs and grow business . 
  • Accelerating financial inclusion . 
• Historical background of Unification: 
  • In the first phase (2006-2010), the number of RRBs was reduced from 196 to 82. 
  • In the second phase (2013-2015), it was reduced from 82 to 56 and in the third phase, it was reduced from 56 to 43. 
  • Now there will be a total of 28 RRBs left in the fourth phase . 
• Merger of banks in Madhya Pradesh:  
  • From 1 May 2025, Madhya Pradesh Gramin Bank and Madhyanchal Gramin Bank have merged into a single rural bank, sponsored by Bank of India with its headquarters in Indore.  
  • The move aims to strengthen rural banking and streamline operations. 

 Regional Rural Banks (RRBs) 

• Regional Rural Banks (RRBs) were established in the year 1975 under the provisions of the Ordinance promulgated on September 26, 1975 and the Regional Rural Banks Act, 1976. 
• RRBs are financial institutions which ensure adequate credit for agriculture and other rural sectors. 
• RRBs enhance the co-operative features and the capacity of a commercial bank to mobilise business and financial resources while being familiar with rural problems. 
• Regional Rural Banks are operated in collaboration with the Government of India, State Governments and sponsor banks.  
• The shareholding of the Government of India, sponsor banks and the respective states in these banks is 50%, 35% and 15% respectively.  
• Regional Rural Banks are regulated by the ‘National Bank for Agriculture and Rural Development ' (NABARD).