Impact of merger on the profitability performance of Regional Rural Banks (RRBS) in India: A region-wise comparative study

Consolidation have become a major approach in corporate restructuring in the world today and financial services industry has also experienced merger waves leading to the origin of very large banks and financial institutions. Since 1975 RRBs are being regarded as one of most important sources of institutional financing of rural credit in India. But at the end of expansion phase (1987) financial viability of the RRBs emerged as an important issue to the policy makers. Since 1991, various steps have been taken up by Government of India (GOI) for strengthening the RRBs e.g. cleansing of balance sheets, recapitalization of selected RRBs etc. State-wise & Sponsor bank wise merger of RRBs is the recent route of restructuring in RRBs for improving their financial viability. There is always a need for up-gradation of the rural banking systems in India through performance evaluation in the context of necessity of institutional rural credit to the poor rural folk. Therefore an attempt is made through this work to examine region wise impact of merger on the profitability performance of RRBs in India.