The merger of Regional Rural Banks (RRB) with their sponsor banks would avoid business cannibalization and reduction in administrative overheads, the All India Bank Employees' Association (AIBEA) said on Monday.
In a letter to Union Finance Minister Nirmala Sitharaman, AIBEA General Secretary C.H. Venkatachalam said instead of further reforms in the RRB sector, it would be better to merge them with their sponsor banks as this will add to the rural network of the latter and at the same time, eliminate the weaknesses that they suffer presently.
"Monitoring would be much more effective since they would become part of the bank and come under the direct control of the management of the sponsor banks. This would also obviate a lot of administrative overheads and expenses," he said.
While the objectives of RRB are laudable, their very nature of the business makes them fragile and vulnerable, he noted.
"More often than not, these RRBs even face competition from their own sponsor banks too. In this background, there have been many efforts to restructure the RRBs to make them strong and vibrant but the results have not been that encouraging because of the intrinsic reasons and they are bound to be so," Venkatachalam said.