Rangarajan warns against RRB consolidation, calls for RBI push on small finance banks

Former RBI Governor C. Rangarajan has cautioned against consolidation of regional rural banks (RRBs), calling it "a step in the wrong direction." He warned that the process risks undermining the local character that RRBs bring to rural credit delivery.

Rangarajan urged the RBI to incentivise small finance banks (SFBs) as a complementary approach. However, he noted that the current 11 SFBs operating in the sector are insufficient to meet unmet credit needs across rural India.

The former central banker's remarks highlight concerns over the adequacy of formal credit access in agricultural and semi-urban regions as banking consolidation accelerates.