How Sponsor Banks Control Is Strangling the Brand Identity of RRBs?
Sponsor banks are stifling RRBs through control and competition. It's time for reforms and independent rural banking governance.
Author: Rural Banker
Published: 15 hours ago
After over a decade of service in a Regional Rural Bank (RRB), I vividly recall the day I was entrusted with leading a branch as a Scale-I officer. It felt like recognition of my potential to mobilise business and enhance the bank’s profitability. I worked tirelessly to improve our branch’s performance. But the real challenge did not come from market players—it came from the nearby branch of our own sponsor bank.
This is not an isolated experience. Across the country, wherever RRBs have long-standing branches, sponsor banks often establish their own branches in the same vicinity.
Armed with superior technology and manpower, sponsor banks do not limit themselves to a mentoring role—they compete directly with the RRBs they are meant to support. Instead of providing scaffolding to help RRBs develop an independent identity, sponsor banks often cast a long, overpowering shadow. Despite the Government’s repeated efforts to strengthen RRBs through capital infusion, the biggest hurdle remains the sponsor banks’ behaviour—functioning as both master and rival.
How “Brand RRB” is Being Derailed?
Through a pattern of neglect and competitive encroachment, sponsor banks have reduced RRBs to subordinate entities. Here’s how this dual-role—mentor and market rival—has impaired RRBs and diluted their core purpose:
1. Sponsor Bank’s Name in RRBs’ Logos: An Affront to Identity
A bank’s logo is more than just a symbol—it is its identity. However, a large number of RRBs carry the name of their sponsor banks within their logos, such as:
Image: Kerala Gramin Bank logo with Canara Bank’s name
Image: Jammu and Kashmir Grameen Bank’s logo with its sponsor bank, J&K Bank
Image: Telangana Grameen Bank’s logo with its sponsor bank, State Bank of India
This practice compromises the independent identity of RRBs. Including the sponsor bank's name in RRB logos reflects a kind of hegemony—suggesting RRBs are merely extensions of sponsor banks. Rather than supporting RRBs in becoming independent entities, this branding reinforces a sense of permanent subservience.
2. Higher Rates of Interest in RRBs than Sponsor Banks
Another troubling pattern emerges in interest rate structures. RRBs often offer higher lending rates than their sponsor banks for similar loan products. Naturally, customers gravitate toward the more affordable credit options offered by nearby sponsor bank branches.
Why would any rational borrower choose a costlier loan from an RRB when a cheaper option exists just across the road? This pricing imbalance handicaps RRBs and appears to be a deliberate strategy to ensure their continued dependence. In this setup, sponsor banks act as both masters and competitors—dictating policy from the top while simultaneously drawing away RRB customers on the ground.
Meanwhile, review meetings with RRB staff continue routinely. Branch heads are asked to explain target shortfalls, but when they raise operational constraints, the default response remains, “Should we shut down the branch?”
3. Staff Welfare Tied to Cost-Income Ratio:
Despite structural disadvantages, RRB staff remain committed to their mission. Yet their welfare is often sidelined in the name of cost control.
Many RRB branches lack security guards, leaving staff vulnerable. When associations raise the issue, the response is that the cost may push the bank into losses or attract RBI’s prompt corrective action.
Fuel allowances are another case in point. While sponsor bank staff receive adequate support, RRB officers must manage wide field operations with only ₹1,200 or 12 litres of fuel allowance per month. This is expected to cover business mobilisation and recovery work worth lakhs or crores. In reality, staff often dip into their own pockets to fulfil official responsibilities.
Any appeal for better allowances is met with the same argument: “It will worsen the cost-to-income ratio.” This paradox undermines staff morale and savings, even as they deliver essential financial services under intense pressure.
Time to Rethink: Toward a Self-Reliant Rural Banking Framework
These issues reflect a deeper malaise: the sponsor banks’ approach to their role. Rather than nurturing RRBs, they are slowly stifling them. Serious structural reform is overdue.
The Prime Minister’s vision of a self-reliant India cannot be realised unless rural banks—key pillars of rural finance—are empowered to become self-reliant too. One major step toward this is the creation of a National Rural Bank of India (NRBI)—an apex institution that brings all RRBs under one independent, professional umbrella. This would grant RRBs long-overdue autonomy, better governance, and a level playing field.
Just as crucial is the appointment of RRB Chairpersons through open-market recruitment rather than deputation from sponsor banks. Professionals with a genuine vision for rural banking must be entrusted with leading these institutions into the future.
RRBs were created to serve rural India with sensitivity and focus—something large commercial banks struggle to deliver. But the very banks meant to support them are now curbing their growth and spirit. It’s time to reimagine the role of sponsor banks and give RRBs the space, resources, and autonomy they need to thrive. Because only when rural banks are truly independent can India’s rural economy stand strong on its own feet.
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