Purwar: Merger mantra

Mumbai, April 22: Regional rural banks in the country are in for a shakeout. A high-level meeting early next month will take up the crucial issue of merging these banks on a zonal basis.

The consolidation proposal has come from a committee sponsored by the Indian Banks Association (IBA) and headed by State Bank chairman A.K. Purwar. The proposal envisages creation of six zonal-level RRBs post merger.

Sources said these zonal-level RRBs will be sponsored by six nationalised banks who have the widest network in sub-zones.

The six sponsor banks that figure on Purwar’s list include State Bank of India, Central Bank of India, Bank of Baroda, Syndicate Bank, Bank of India (BoI) and Punjab National Bank (PNB).

According to the proposal, the equity holding pattern will be such that while the Union government will hold 50 per cent, the sponsor banks and state governments will have a shareholding of 35 per cent and 15 per cent respectively.

While other details are yet to be worked out, the All India Regional Rural Bank Officers Federation (AIRRBOF), which is the representative union of 25,500 officers working in RRBs, has urged that RRBs must ensure the continuance of pay parity with sponsor banks. They have also asked that there should be minimal out-of-station transfer and that there should be no compulsory severance of jobs.

“We have also demanded that the career progress of officers must be ensured in such a restructuring process,” S.K. Bhattacharjee, general secretary of the federation, said.

The high-level meeting that is likely to be held on May 1 will be attended by . S. Sisodia, financial sector secretary, Purwar himself apart from chief executives of other nationalised banks. The Reserve Bank of India (RBI) deputy governor K.J. Udeshi and Ranjana Kumar, chairperson, National Bank for Agriculture and Rural Development (Nabard) are also expected to be present.

The various zones that have been suggested include East, Northeast, Central, West, North and South. Sources said while Central Bank of India is likely to be the sponsor bank for the East, the amalgamated RRB for Northeast is likely to be sponsored by SBI.

According to the figures for the year ended March 31, 2003, while 156 RRBs posted profits of Rs 734 crore, there were close to 40 such banks who recorded a loss of Rs 215 crore. The total accumulated loss of RRBs was then put at Rs 2752 crore.