The government has decided to exempt mergers of regional rural banks (RRBs) ordered by it from the requirement of clearance from the Competition Commission of India, a senior official said, an indication that the next round of consolidation of such lenders may be in the offing.
The exemption, aimed at fast-tracking such mergers, would be granted for five years, the official said on condition of anonymity. Relevant sections of the Competition Act will not apply to these transactions during this period, he said.
A similar relief was granted by the corporate affairs ministry in 2017 for a five-year period.
The latest move comes at a time when the government has stepped up focus on modernising the RRBs in a bid to spur credit growth in remote areas and boost economic activities. It had earlier favoured the amalgamation of RRBs to enable them to minimise their expenses, shore up the capital base, optimise the use of technology and raise their exposure.
The number of RRBs fell to 43 in 2021-22 from 196 in 2004-05, following a series of amalgamations.
Last year, finance minister Nirmala Sitharaman had asked the department of financial services and sponsor banks to formulate a clear road map to further bolster the RRBs. Subsequently, the finance ministry stipulated that RRBs would be eligible to list on the bourses and raise funds if they had net worth of at least Rs 300 crore over the previous three years and if they fulfilled certain other conditions.
Currently, the 43 RRBs are backed by 12 state-run banks (sponsor banks). The central government usually holds 50% in RRBs, while the relevant sponsor banks and state governments own 35% and 15%, respectively.
The RRBs together recorded a net profit of Rs 3,219 crore in 2021-22, up 91.4% from Rs 1,682 crore in the previous year, showed the data by NABARD. They had, however, incurred losses of Rs 2,208 crore in 2019-20.
The gross non-performing assets (NPAs) of RRBs eased to 9.1% in 2021-22 from 9.4% in the previous fiscal. Similarly, their net NPAs fell marginally to 4.7% in 2021-22 from 4.8% in the previous year. Their deposits grew 7.1% on year in 2021-22 to Rs 5.63 lakh crore, while outstanding advances stood at Rs 3.63 lakh crore, up 8.6% from 2020-21.
