REGIONAL RURAL BANKS
The need for evolving a hybrid type of credit agency which combines the resource
orientation of the commercial banks and the rural orientation of the co-operatives has been
expressed in the reports of a few of the committees which have looked into rural credit
problems.
To review the flow of institutional credit especially to the weaker sections of the rural
community, the Government of India appointed a Working Group in 1975 under the
chairmanship of Narasimhan. The Group identified certain deficiencies in the functioning of co-
operatives and commercial banks and recommended the setting up of state-sponsored,
regionally based and rural oriented banks called Regional Rural Banks (RRBs) which would
encompass local feel and familiarity with several problems which the co-operatives possess and
the degree of business organization, ability to mobilize the deposits, access to central money
markets and a modernized outlook which the commercial banks have. The Government of India
accepted this recommendation and RRBs were established in
1976.
The main objective of RRB is to provide finance to small and marginal farmers,
agricultural labourers, artisans and small entrepreneurs whose annual income is less than
Rs.10,000.
Features
The idea behind the establishment of RRBs is to develop a comparatively backward
area where the commercial bank and co-operative is relatively poor. The main difference from
the commercial bank is that the area of operation of RRB is confined to a region comprising one
or two contiguous districts. One of the tasks envisaged for the RRBs is to maintain their cost of
operations at a lower level than that of the commercial banks. So the salary structures of the
staff were comparable to that of the State government employees.
RRBs are sponsored by schedule commercial banks. A few non-public sector
commercial banks and state co-operative Banks are also allowed to sponsor RRBs. The
sponsoring bank provides managerial assistance to RRBs for the first five years. The
management of RRB is through a nine member Board of Directors headed by a chairman who
is an officer of the sponsor bank. The Board consists of three nominees of Government of India,
two nominees of the concerned State government, four including the chairman by the sponsor
commercial bank.
, The authorized share capital of a RRB has been fixed at Rs.5 crore and issued capital is Rs.
one crore. Of this, 50 per cent is subscribed by the central government, 15 per cent by the
concerned state government and 35 per cent by the sponsor bank.
Progress of RRBs in India
S. No. Particulars 1976 1980 1990 2000 2009
1. Number of RRBs 40 85 196 196 86
2. Number of 489 3,279 14,444 14,301 15,199
branches
3. Deposits (Rs.in 7.72 199.83 4,150.52 32,204 1,17,984
crores)
4. Advances (Rs.in 7.02 243.38 3,554.04 13,184 69,030
crores)
5. Number of loss 23 60 NA. 34 6
making banks
Purpose-wise Break up of RRB advances
(Amount Rs. in crores)
Sl.No. Purpose 1990 2009
Amount Per cent Amount Per cent
1. Short term (crop loan) 615 17.3 24,986 36.2
2. Term loans for agriculture 669 18.8 11,480 16.6
3. Advances to activities 555 15.6 0.0
allied to agriculture
4. Indirect Advances 43 1.2 - 0.0
4. Rural artisans, village and 277 7.8 2220 3.2
cottage industries
5. Retail trade and self 1052 29.6 5,015 7.3
employment
6. Consumption loans/other 344 9.7 25,329 36.7
purposes
Total 3555 100.0 69,030 100.0
Source: Report on Trend and progress of Banking in India, 1990-91 and 2008-09.
Performance
The need for evolving a hybrid type of credit agency which combines the resource
orientation of the commercial banks and the rural orientation of the co-operatives has been
expressed in the reports of a few of the committees which have looked into rural credit
problems.
To review the flow of institutional credit especially to the weaker sections of the rural
community, the Government of India appointed a Working Group in 1975 under the
chairmanship of Narasimhan. The Group identified certain deficiencies in the functioning of co-
operatives and commercial banks and recommended the setting up of state-sponsored,
regionally based and rural oriented banks called Regional Rural Banks (RRBs) which would
encompass local feel and familiarity with several problems which the co-operatives possess and
the degree of business organization, ability to mobilize the deposits, access to central money
markets and a modernized outlook which the commercial banks have. The Government of India
accepted this recommendation and RRBs were established in
1976.
The main objective of RRB is to provide finance to small and marginal farmers,
agricultural labourers, artisans and small entrepreneurs whose annual income is less than
Rs.10,000.
Features
The idea behind the establishment of RRBs is to develop a comparatively backward
area where the commercial bank and co-operative is relatively poor. The main difference from
the commercial bank is that the area of operation of RRB is confined to a region comprising one
or two contiguous districts. One of the tasks envisaged for the RRBs is to maintain their cost of
operations at a lower level than that of the commercial banks. So the salary structures of the
staff were comparable to that of the State government employees.
RRBs are sponsored by schedule commercial banks. A few non-public sector
commercial banks and state co-operative Banks are also allowed to sponsor RRBs. The
sponsoring bank provides managerial assistance to RRBs for the first five years. The
management of RRB is through a nine member Board of Directors headed by a chairman who
is an officer of the sponsor bank. The Board consists of three nominees of Government of India,
two nominees of the concerned State government, four including the chairman by the sponsor
commercial bank.
, The authorized share capital of a RRB has been fixed at Rs.5 crore and issued capital is Rs.
one crore. Of this, 50 per cent is subscribed by the central government, 15 per cent by the
concerned state government and 35 per cent by the sponsor bank.
Progress of RRBs in India
S. No. Particulars 1976 1980 1990 2000 2009
1. Number of RRBs 40 85 196 196 86
2. Number of 489 3,279 14,444 14,301 15,199
branches
3. Deposits (Rs.in 7.72 199.83 4,150.52 32,204 1,17,984
crores)
4. Advances (Rs.in 7.02 243.38 3,554.04 13,184 69,030
crores)
5. Number of loss 23 60 NA. 34 6
making banks
Purpose-wise Break up of RRB advances
(Amount Rs. in crores)
Sl.No. Purpose 1990 2009
Amount Per cent Amount Per cent
1. Short term (crop loan) 615 17.3 24,986 36.2
2. Term loans for agriculture 669 18.8 11,480 16.6
3. Advances to activities 555 15.6 0.0
allied to agriculture
4. Indirect Advances 43 1.2 - 0.0
4. Rural artisans, village and 277 7.8 2220 3.2
cottage industries
5. Retail trade and self 1052 29.6 5,015 7.3
employment
6. Consumption loans/other 344 9.7 25,329 36.7
purposes
Total 3555 100.0 69,030 100.0
Source: Report on Trend and progress of Banking in India, 1990-91 and 2008-09.
Performance
