abstract

The dual goals of financial inclusion and institutional consolidation have significantly influenced the path of Regional Rural Banks (RRBs) in India since they were founded in 1975. Designed to promote financial democracy in rural areas, RRBs have experienced major structural changes through three phases of mergers (2005–2019), shrinking from 196 banks to just 43, all while increasing their branch networks and business activities. This review paper takes a close look at how financial inclusion outcomes relate to the restructuring of RRBs driven by these mergers, using empirical data from research published between 2000 and 2020. It outlines the development of financial inclusion policies in India-from the era of social banking and priority sector initiatives to the modern JAM (Jan Dhan-Aadhaar-Mobile) framework-and assesses the crucial role RRBs play in this process. Additionally, it examines the performance of RRBs before and after mergers across various aspects: branch growth, deposit collection, credit-deposit ratios, lending to priority sectors, profitability, and management of non-performing assets. The review also evaluates how effective key government programs-like the Pradhan Mantri Jan Dhan Yojana (PMJDY), Kisan Credit Card (KCC), Self-Help Group Bank Linkage Programme (SHG-BLP), and Direct Benefit Transfer (DBT)-have been in utilizing RRBs as channels for delivering these services. The findings indicate that while mergers have led to improvements in capital strength, operational efficiency, and returns on equity, challenges still persist in areas like credit distribution, technology use, and the quality of financial interactions with rural customers. The paper wraps up with a research-based policy agenda aimed at transforming RRBs into impactful, tech-savvy institutions that can enhance financial inclusion in rural India.