Govt Likely To Come With IPO Of 3-4 Regional Rural Banks In FY19

The government is planning to list three to four financially strong regional rural banks (RRBs) on the stock exchanges in the current fiscal on conclusion of consolidation exercise, a PTI report said.

The report further said the bank consolidation exercise is being conducted to enable RRBs to minimise their overhead expenses, optimise the use of technology, enhance the capital base and area of operation and increase their exposure. The exercise is expected to bring the number of RRBs down to 38 from the current 45.

In the past few months, as many as 21 banks were amalgamated in various states to create a large entities for the benefit of economies of scale and more will take place as state governments give their go-ahead, the report said.

RRBs were formed with an objective to provide credit benefits to small farmers, agricultural labourers and artisans in rural areas. After amendment of the RRB Act in 2015, banks were permitted to raise capital from sources other than the Centre, states and sponsor banks. Currently, the Centre holds 50 percent in RRBs, while 35 percent and 15 percent are held by concerned sponsor banks and state governments, respectively.

Even after stake dilution, the shareholding of the Centre and the sponsor public sector banks together cannot fall below 51 percent according to the amended Act, leaving the ownership and control with the government.