Despite heavy resistance from unions, the finance ministry has intensified its efforts to merge Regional Rural Banks (RRBs) within a state. It has recently conveyed to both RRBs and sponsor banks about deputation of Scale I to Scale IV officers of both entities to each other’s organizations.
The ministry has sought consent from state government of Tamil Nadu to merge two RRBs sponsored by Indian Overseas Bank and Indian Bank. Consent of the state is necessary as it owns 15% stake in RRBs, while 35% is owned by the sponsor-banks and 50% by the Centre. It has been directed by the ministry that 20% of officers from RRBs need to be deputed to their respective sponsor banks. At the same time, these officer positions in RRBs need to be filled by officials from the sponsor banks. Given that the government is staring at a huge fiscal deficit, disinvestment of its stake in RRBs in favor of sponsor banks would fetch it cash. This would help bring down the deficit, said a senior public sector bank official.
“When it comes to drawing up policies for RRBs, the Ministry seems to be confused. First it wanted sponsor banks to take necessary action regarding operational integration and human resources development. Then it came up with the cross-merger proposal. Now it has come up with this new policy on human resources,” Mr S.K. Bhattacharjee, General Secretary, All India RRB Officers Federation. He observed that such instructions are creating a lot of uncertainty. Sponsor banks are quite hesitant to take any action on the Ministry’s instructions as they are unaware of the unfolding situation.
Opposition to cross-mergers: With various stakeholders in sponsor banks and RRBs expressing their opposition to the Ministry’s proposal for cross-mergers of RRBs, the Ministry may have found a via-media – merger of RRBs with their sponsor banks – to pacify them, say RRB insiders.
RRBs: Responsibility of sponsor banks
Underscoring the fact that that the Government has made the sponsor banks responsible for the functioning of RRBs and that sponsor banks have incurred huge cost in putting RRBs under core banking solution platform, Mr Bhattacharjee said they should be merged with their sponsor banks.
In a parallel development, the ministry has also asked sponsor-banks to transfer 20% of their staff to the RRBs and vice-versa.