The government has exempted regional rural banks (RRBs) from prior scrutiny and approval of the Competition Commission of India (CCI) for five years, the corporate affairs ministry said in an executive order.

Analysts said this would boost the next round of consolidation of RRBs and the exemption would lead to faster closure of such transactions.

“The central government, in public interest, hereby exempts the regional rural banks notified under sub-section (1) of section 23A of the Regional Rural Banks Act, 1976 (Act no. 21 of 1976), from the application of provisions of section 5 and 6 of the Competition Act, 2002 for a period of five years,” the corporate affairs ministry’s order says.

There are about 43 RRBs (as of 2021) in India and these entities are regulated by the Reserve Bank of India (RBI).

The CCI, which comes under the corporate affairs ministry, keeps a tab on unfair business practices. Mergers and acquisitions beyond a certain threshold compulsorily require clearance from the fair trade watchdog.

The RRBs — set up under the RRB Act, 1976 — provide credit and other facilities to small farmers, agricultural labourers and artisans, among others, in rural areas. The provisions of sections 5 and 6 of the Competition Act would not be applicable for five years on such transactions. Sections 5 and 6 pertain to the combination of enterprises.

Analysts said if the government wishes to amalgamate certain regional rural banks in the public interest, then regulatory approvals should be kept at the minimum. This exemption would help ensure that these transactions close quickly.