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Finance Ministry Discusses One State-One RRB, Urges RRBs to Address Attrition, Deposit Growth, and Tech Gaps
As per an official of the Department of Financial Services (DFS), the “One State, One RRB” policy that includes further amalgamation of RRBs was discussed with an aim to improve their overall operations. The official also revealed that, “the amendment draft rules for the policy is underway and by September end its drafting is expected to be completed.”

Author: Saurav Kumar
Published: September 11, 2024
In a series of review meetings chaired by Union Finance Minister Nirmala Sitharaman, Regional Rural Banks (RRBs) have been urged to take immediate steps to reduce high attrition rates, tackle the falling deposit growth exacerbated by cross-selling practices, and upgrade their technology infrastructure to meet modern banking standards. The discussions, which took place on August 19, 2024, highlighted key issues facing RRBs and set clear expectations for improvement.
Discussion on One State - One RRB
In the last review meeting on September 2, the Union Finance Ministry explored the consolidation of RRBs through the “One State - One RRB” policy.
An official of the Department of Financial Services (DFS) revealed to a confirmed source, “the One State - One RRB policy, which involves further amalgamation of RRBs, was discussed with the goal of enhancing their operational efficiency. He added, “The draft rules for this policy are currently being formulated, and we expect the drafting to be completed by the end of September.”
Commenting on the matter, S. Venkateshwar Reddy, Secretary General of AIRRBEA, told Kanal, “The 'One State, One RRB' policy is under serious consideration and represents a vital initiative aimed at reducing the number of sponsor banks, ultimately phasing out their role. The next step in this process would be the establishment of the National Rural Bank of India.”
The Finance Ministry has also urged sponsor banks to play a more active role in supporting RRBs by providing technical assistance and sharing best practices.
Reducing High Attrition Rates
One of the most pressing issues discussed was the high attrition rates plaguing RRBs. Despite offering similar pay scales as Scheduled Commercial Banks (SCBs), RRBs struggle to retain employees who often leave for better opportunities in SCBs. The Finance Minister stressed the need for more employee-friendly policies, particularly emphasising the importance of local postings. By assigning employees to branches closer to their home regions, the minister believes RRBs can improve staff retention, enhance customer interactions, and ultimately boost bank performance. According to NABARD data, the total number of RRB employees dropped from 95,833 in FY22 to 91,664 in FY23, underscoring the severity of the issue.
Image: AIRRBEA letter on Finance Ministry’s Review of the RRBs
Falling Deposit Growth: The Menace of Cross-Selling
The review meetings also addressed the troubling trend of falling deposit growth in RRBs, which has been linked to aggressive cross-selling practices. Over the past decade, banks have increasingly focused on selling third-party products, such as insurance, at the expense of traditional deposit growth. The Finance Minister pointed out that bank officials are often incentivized to push life insurance policies over fixed deposits, leading to a significant diversion of funds away from traditional banking products. The letter points out to the shift that has contributed to a slower growth rate in bank deposits, with data showing that if the funds directed into insurance had been placed in fixed deposits, bank deposit growth would have been 5.5% higher in FY23. The Ministry has called for a reevaluation of these practices to restore confidence in the banking system and stabilise deposit growth.
Technology Upgradation in RRBs
Technology was another critical area of focus during the meetings. The Finance Minister emphasised the need for RRBs to modernise their IT infrastructure, particularly in terms of cybersecurity and digital services. With RRBs reporting their highest-ever consolidated net profit of Rs 7,571 crore in FY24, with a growing expectation of investment in technology to maintain their competitive edge. It is also to ensure that RRBs have robust and up-to-date technology stacks to support their operations. In particular, digital banking services, such as mobile banking, are seen as essential for regions with limited physical connectivity, such as the northeastern states and hilly areas.
The Finance Ministry’s directives aim to address the systemic issues that have been hampering RRBs, from employee attrition to deposit growth, technological deficiencies and possibility of One State One RRB. And, RRBs are expected to improve their performance and continue their crucial role in supporting rural development and financial inclusion across India.