Kolkata: Staff associations at mainstream lenders and their linked rural counterparts appear to have a vertical split in their ranks – and the feared loss of identity for the latter through proposed mergers has turned one-time comrades into future combatants.
The All India Bank Officers’ Confederation (AIBOC) and All India Bank Employees’ Association (AIBEA) — the two largest bank unions with a collective membership of more than half a million backers — have demanded regional rural banks (RRB) be merged with their respective sponsor banks, effectively putting the operational efficiency of the latter group of lenders under a scanner.
The Regional Rural Bank Employees Association, in response, has opposed the demand, furnishing facts to argue their case. It said 43 RRBs have improved their performance over the years and have collectively earned a net profit of Rs 7,300 crore in FY24, having managed a business of Rs 10.4 lakh crore at the end of March. Their collective gross advances were around Rs 4.32 lakh crore.
In a joint submission to finance minister Nirmala Sitharaman, AIBOC and AIBEA said that as many as 16 out of 43 RRBs face either negative capital adequacy or capital level lower than the mandatory 9%, despite receiving a Rs 10,890 crore capital boost in 2021-22 from their shareholders — the central government, sponsoring banks and the respective state governments.
“The need for maintaining a healthy CRAR will be further accentuated with the projected increasing credit flow to the rural sector. This will create a serious viability issue for the RRBs, which can only be mitigated by its merging with the sponsor banks,” the associations said in a joint memorandum submitted to finance minister Nirmala Sitaraman.
The merged entity will be able to access the capital market reducing its dependence on budgetary support, which will be beneficial for fiscal management of the government, the note said.
“Their suggestion is based on a wrong premise,” said National Federation of RRB Officers general secretary Abdul Sayeed Khan. “At present, only three RRBs out of 43 have CRAR less than 9%. Moreover, these regional banks act as a major cog in India’s quest to achieve financial inclusion. Merger with public sector banks would defeat the basic purpose of RRBs.”
The All India Regional Rural Bank Employees Association termed the merger proposal “objectionable, anti-employee, anti-people”.
“We do not like to go to the past history how the RRBians have been badly treated by the so called big brothers in banking industry unable to manage the problems faced by their own members due to several mergers, they want to anyhow get some relief showing RRB employees some imaginary benefits,” AIRRBEA secretary general S Venkateswar Reddy said.
