One State, One Rural Bank: Bihar To Merge North And South Gramin Banks Into Single Entity From May 1

By Kamakshi Bishnoi
Wed, 09 Apr 2025 04:04 PM (IST)

Source:JND

A significant restructuring of regional rural banks is set to take place in Bihar as the North Bihar Rural Bank and South Bihar Rural Bank will be officially merged from May 1 to form a unified entity — Bihar Gramin Bank. With a total of 2105 branches across all districts, this will become the largest rural bank in the state. Punjab National Bank will serve as its sponsor bank, and the head office will be located in Patna.

This move is part of the "One State-One Rural Bank" initiative under which the Ministry of Finance has issued a gazette notification to merge 15 regional rural banks (RRBs) across 10 states and one union territory, including Bihar. All the newly constituted rural banks will begin operations from May 1, with each having an authorised capital of Rs 2,000 crore. The decision was made in consultation with NABARD, state governments, the Government of Jammu & Kashmir, and respective sponsor banks.

This merger marks the fourth phase of rural bank consolidation in India. According to banking expert DN Trivedi, there were 196 rural banks in the country (22 in Bihar) until 2005. Following three prior rounds of integration, the total number came down to 43. With this latest phase, the number will now reduce further to 28 RRBs nationwide, and only one in Bihar.

North Bihar Gramin Bank, operating in 18 districts, has 1027 branches, while South Bihar Gramin Bank covers 20 districts with 1078 branches. The merger is aimed at improving the efficiency, viability, and overall performance of rural banks. Trivedi emphasised that while the expenditure of RRBs is comparable to their sponsor banks, their business volume remains much lower, making sustainability a concern. Hence, consolidation is seen as a path toward strengthening the rural economy.

Similar mergers are taking place across other states:

-In Uttar Pradesh, Baroda UP Bank, Aryavart Bank, and Prathama UP Gramin Bank will merge to form Uttar Pradesh Gramin Bank, headquartered in Lucknow with Bank of Baroda as the sponsor.

-In West Bengal, Bangiya Gramin Vikas Bank, Paschim Banga Gramin Bank, and Uttar Banga Kshetriya Gramin Bank will merge into Bangla Gramin Bank, with PNB as sponsor and Kolkata as the head office.

Similar two-bank mergers will occur in Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, and Jammu & Kashmir.