The proposed merger reduces the number of RRBs from 43 to 28 to make them more efficient.  

• Consolidation is also derived from vision of One State-One RRB. 

Consolidation of RRBs

• RRBs have been consolidated in a phased manner based on recommendations of Dr. Vyas Committee (2001).
  • Consolidation began in 2004-05 which resulted in reduction of such institutions from 196 to 43 till 2020-21 through 3 phases of amalgamation.
• Significance of consolidation: Minimised overhead expenses, technology adoption, enhanced capital base and area of operation, and increased exposure.

About Regional Rural Banks (RRBs)

• Genesis: Established in 1975 on the recommendations of the Narsimhan Working Group (1975), after promulgation of an ordinance, which was later replaced by the Regional Rural Banks Act, 1976.
• Objectives: To develop the rural economy by providing credit and other facilities particularly to small and marginal farmers, agricultural labourers, small entrepreneurs etc.
• Shareholding: Government of India (50%), State Government (15%), and Sponsor Bank (35%)
• They are Scheduled Commercial Banks (Government Banks) regulated by RBI and supervised by National Bank for Agriculture and Rural Development (NABARD). 
• Created primarily for rural areas, however, may also set up branches in urban areas.