C. Rangarajan flags fewer regional rural banks as ‘a step in the wrong direction’; urges RBI to incentivise SFBs
Former RBI Governor C. Rangarajan has criticized the consolidation of Regional Rural Banks (RRBs), arguing that the 'One State-One RRB' policy strips these institutions of their local character. He urged the Reserve Bank of India to incentivize the creation of more small finance banks to better serve vulnerable populations.
Why it matters
This critique challenges the government's strategy of prioritizing operational efficiency and economies of scale over localized, grassroots banking services in rural India.
Former Reserve Bank of India Governor C. Rangarajan has criticised the consolidation of Regional Rural Banks (RRBs), saying the move has undermined their local and regional character and could eventually lead to their merger with universal banks.
“What has happened to Regional Rural Banks?” Mr. Rangarajan asked while speaking at an event in Chennai marking the 10th anniversary of Equitas Small Finance Bank.
He said RRBs had now been merged, leaving one RRB for each State. In one case, he said, the parent bank had also absorbed the RRB.
“To me, this is a step in the wrong direction,” he said.
“It essentially loses the local and regional character of these banks, and ultimately they may get merged with the universal banks as well.”
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