Karnataka implements 'One State, One Bank' policy as two rural banks merge

In a significant move under the Centre's ‘One State, One Bank’ initiative, Karnataka has consolidated its rural banking operations by merging two of its regional rural banks. Karnataka Vikas Grameena Bank (KVG Bank), headquartered in Dharwad, and Karnataka Gramin Bank, headquartered in Bellary, have officially merged to form a single entity—Karnataka Grameena Bank, which begins operations from today.

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The newly-formed bank will remain under government ownership, with the Central Government holding a 50% stake, the State Government 15%, and sponsor bank Canara Bank holding 35%. Karnataka Grameena Bank will now operate 1,751 branches and handle a business volume of ₹10.54 lakh crore.

This merger is part of a broader effort by the Union Finance Ministry to enhance the efficiency and viability of Regional Rural Banks (RRBs). The national initiative has reduced the number of RRBs from 42 to 28 by merging 15 banks across various states.

Andhra Pradesh leads with four RRBs post-merger, followed by Uttar Pradesh and West Bengal with three each. States like Bihar, Gujarat, Madhya Pradesh, Jammu & Kashmir, Maharashtra, Odisha, Rajasthan, and Karnataka now have two each.

The government aims to universalize costs, streamline governance, and improve service delivery through these consolidations, marking a major shift in rural banking strategy across India.