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India's Regional Rural Banks (RRBs) are set to play a growing role, with their business expected to rise to around 5.2 per cent of GDP by Financial Year (FY) 2030 from 3.7 per cent in FY24 after the recently announced consolidation, according to a latest report by PwC.
The report added that the expansion in the RRB's business will be a key step in supporting India's long-term goal of becoming a USD 30 trillion economy by 2047. "Following consolidation, the total RRB business as a percentage of India's GDP is expected to reach 5.2% by FY30 from 3.7%6 as of FY24, helping the nation in its journey towards becoming a USD 307 trillion economy by 2047," PwC said in the report. On April 8, the Department of Financial Services (DFS) notified the amalgamation of 26 Regional Rural banks (RRBs) on the principles of 'One State One RRB'. This was the fourth phase of the amalgamation of RRBs. The amalgamated RRBS across 11 states and Union territories have come into effect from May 1, 2025. Considering the improvement in the efficiency of the RRBs due to amalgamations in the past, the Ministry of Finance rolled out an amalgamation plan in November 2024 for consultation with stakeholders. After consultation with stakeholders, amalgamation of 26 RRBs in 10 States and 1 UT has been carried out with a primary focus on improvement in scale efficiency and cost rationalisation. Post the latest amalgamation, there will be 28 RRBs in 26 states and 2 UTs with more than 22,000 branches covering 700 districts. Their predominant area of operation is in rural areas, with approximately 92 per cent of branches in rural or semi-urban areas. In the previous three phases - Phase I (FY 2006 to FY 2010), the number of RRBs was reduced from 196 to 82; Phase II (FY 2013 to FY 2015), the number of RRBs was reduced from 82 to 56; and Phase III (FY 2019 to FY 2021), the number of RRBs was reduced from 56 to 43. According to the Department of Financial Services' website, the Regional Rural Banks (RRBs) were established in 1975 to develop the rural economy by providing, for the development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs. (ANI)
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