THE current state of Regional Rural Banks (RRBs) serves as a stark example of how neoliberal policies are weakening public sector institutions in India. Established to cater to the financial needs of the rural population, these banks are now being steered toward a model that prioritises corporate interests and profit over social welfare. In this race for profitability, the foundational goal of "social banking" is being systematically eroded.

THE GENESIS AND MISSION

RRBs were established in 1975 following the recommendations of the Narasimham Committee, initially through an ordinance and later legalised via the Regional Rural Banks Act of 1976. The official reasoning was that even after the nationalisation of banks in 1969, banking services had not reached rural areas as expected.

The primary objective was to provide low-cost banking services and affordable credit to the rural masses, specifically small farmers, agricultural labourers, small traders, and the self-employed. Research indicates that RRBs have been largely successful in this mission, acting as vital conduits for implementing the government’s social security schemes.

By combining the efficiency of commercial banks with the local familiarity of cooperative banks, a unique banking model was born. Starting with just five banks, the number grew to 196 by 1990. Today, with approximately 22,000 branches, RRBs continue to provide essential services to the rural poor.

CHALLENGES AND MERGERS

Over time, RRBs faced hurdles such as limited operational areas, high administrative costs, and the absence of cross-subsidisation. To overcome these, the All India Regional Rural Bank Employees Association (AIRRBEA) and the Bank Employees Federation of India (BEFI) have long demanded the formation of a National Rural Bank of India (NRBI).

Two parliamentary committees have supported this demand. An NRBI would protect RRBs from private interests and ensure that the rural banking system remains a national asset focused on the welfare of the poor rather than shareholder profits. Recent restructuring under the "One State, One RRB" policy has reduced the number of banks to 28, momentarily creating the impression that a unified national body was finally within reach.

THE THREAT OF PRIVATISATION

The globalisation and liberalisation policies of 1991 shifted the metric of success for RRBs from social impact to "profitability." Forced to compete with profit-driven commercial banks, their core operations began to change. Instead of strengthening these institutions, the Union Government is now moving toward privatization.

Though legislative amendments were passed in 2015, full implementation was delayed—until now. The government is currently moving forward with plans for an Initial Public Offering (IPO) for RRBs.

·         The 2015 Amendment: Allows up to 49% of RRB shares to be transferred to the private sector.

·         Current Ownership: The Union Government (50%), the Sponsor Bank (35%), and the State Government (15%).

·         The Shift: An IPO would drop the Union Government’s stake below 50%, effectively turning these into private entities.

Notably, the IPO process is being initiated in the Gramin Banks of Kerala, Tamil Nadu, and Haryana. Choosing Kerala and Tamil Nadu, states known for their strong resistance to anti-people policies, suggests a calculated move to expedite privatisation where it is most contested.

THE NECESSITY OF PROTECTING THE PUBLIC SECTOR

Eliminating the public sector character of RRBs will have grave consequences:

·         Loss of Affordable Services: Private banks, driven by profit, will likely withdraw from social responsibilities and rural areas that are not "lucrative."

·         Closure of Rural Branches: Unprofitable branches may be shut down, leaving large populations without financial access.

·         Shift to Corporate Lending: Focus will likely shift from agriculture and small industries to high-interest corporate loans.

·         Impact on Labour: Privatisation often leads to downsizing and the weakening of service conditions for employees.

Regional Rural Banks are not merely profit-making machines; they are instruments for ensuring social and economic equality. Neoliberal policies and the proposed IPOs represent a betrayal of public trust and an attempt to sell off a national asset.The demand for a National Rural Bank of India is a crucial intervention to save these institutions for the people. The struggle in the banking sector to protect Regional Rural Banks is not just about the survival of banks; it is a fight for every citizen's fundamental right to dignified and equal financial services.