DFS Announces Fourth Phase of RRB Amalgamation to Boost Efficiency and Coverage

Roughly 92% of the branches of these amalgamated RRBs will be located in rural and semi-urban areas, a clear indication of the banks’ continued focus on serving India’s vast rural hinterland.

In a significant move towards improving the efficiency and scale of operations of Regional Rural Banks (RRBs), the Department of Financial Services (DFS) has notified the amalgamation of 26 RRBs under the "One State One RRB" initiative. This marks the fourth phase of the ongoing effort to streamline the rural banking sector in India.

The Ministry of Finance had initially rolled out an amalgamation plan in November 2024, aimed at enhancing the operational efficiency of RRBs, with an emphasis on better scale efficiency and cost rationalization. Following consultations with key stakeholders, the amalgamation process has been carried out for 26 RRBs in 10 states and one Union Territory (UT), focusing on building stronger financial institutions capable of better serving rural and semi-urban areas across India.

Currently, 43 RRBs are operating in 26 states and 2 UTs across the country, with a robust presence in rural regions. With the new amalgamations, the number of RRBs will be reduced to 28, covering the same 26 states and 2 UTs, but with an increased network of more than 22,000 branches spanning 700 districts. This reduction in the number of RRBs is expected to result in a more consolidated and efficient banking structure, which will be more capable of catering to the financial needs of rural populations.

Roughly 92% of the branches of these amalgamated RRBs will be located in rural and semi-urban areas, a clear indication of the banks’ continued focus on serving India’s vast rural hinterland. The new structure aims to create a more competitive and financially viable banking system that can efficiently deliver banking services in less accessible regions.

This phase of amalgamation continues the trend set by previous phases of RRB restructuring. In Phase-I (FY 2006–2010), the number of RRBs was reduced from 196 to 82. Phase-II (FY 2013–2015) further streamlined the sector, cutting the number of RRBs from 82 to 56, and in Phase-III (FY 2019–2021), the number was brought down further from 56 to 43. With the ongoing phase, the goal is to continue consolidating RRBs to enhance their operational and financial efficiency, making them better equipped to face modern banking challenges and provide better services to rural customers.

The amalgamation process is expected to result in a more robust rural banking system capable of handling the growing financial needs of rural populations in an increasingly digital and connected world. With a more unified structure, these RRBs will be in a stronger position to serve farmers, small businesses, and rural entrepreneurs, helping drive financial inclusion across India.

The DFS’s push for consolidation is based on a proven track record of improving the operational strength of these banks. As the fourth phase rolls out, it is anticipated that these changes will play a pivotal role in driving economic growth and development in India’s rural areas, where access to formal banking remains a critical factor for sustained growth and empowerment.

In summary, the fourth phase of the RRB amalgamation process aims to create a more effective, efficient, and competitive rural banking sector by reducing the number of institutions while expanding the reach of services to millions of rural customers. This strategic move will ensure that RRBs can continue to play a crucial role in India’s financial inclusion agenda and contribute to the overall growth of the rural economy.