Mumbai, March 29: Decks are being cleared for the merger of select regional rural banks (RRBs) in the country. In a pilot project, which has the Centre?s support, few RRBs sponsored by six nationalised banks are set to be amalgamated.

According to industry sources, the plan will ultimately result in public sector banks sponsoring only one RRB in a state. This will be possible by merging all the existing RRBs in that state.

As part of this plan, an experiment is now on with 17 RRBs sponsored by six public sector banks, namely State Bank of India (SBI), Central Bank of India, Punjab National Bank (PNB), Indian Bank, Dena Bank and Bank of Baroda (BoB).

Sources said to begin with, two RRBs that are sponsored by SBI in Uttar Pradesh will be merged into one. Similarly, three RRBs each of Central Bank of India and PNB are proposed to be merged to form two separate entities.

?Indian Bank also has two RRBs in Andhra Pradesh, which are likely to be merged into one. Dena Bank has four RRBs in Gujarat and BoB has three in that state. All these are set to be merged,? the sources added.

Observers feel that if the current experiment is successful and the mergers gather steam in the coming months, the number of RRBs in the country will come down to 84 from the existing 196.

Such a lean structure is likely to be beneficial for RRBs as armed with a relatively bigger size and economies of scale, it could enable them to compete more effectively.

The current project was considered in a meeting of the Reserve Bank of India, National Bank for Agriculture and Rural Development and the ministry of finance in February.