Regional Rural Banks
In the multiagency
approach to provide credit to agriculture, Regional Rural Banks (RRBs) have special
place. They are state sponsored, regionally based and rural oriented commercial banks. The
Govt. of India, in July 1975, appointed a Working Group to study in depth the problem of
devising alternative agencies to provide institutional credit to the rural people in the
context of steps then initiated under the 20 Point Economic Programme. The Working Group
identified various weaknesses of the co-operative credit agencies and the commercial banks
and felt that these institutions would not be able to fill the regional and functional
gaps in the rural credit system within a reasonable period of time. The Group therefore
recommended a new type of institution which combines
Local feel and
familiarity with rural possess problems which co-operative banks.
Degree of business
organization ability to mobilise deposit, access to money market and modernised outlook
which commercial banks have.
Thus, it was
envisaged to combine desirable qualities of co-operative banks and commercial banks in
RRBs at the same time, it was emphasised that the role of RRBs would be to
supplement and not supplant the other institutional agencies already existing in the
of India promulgated the Regional Rural Banks Ordinance on 26th September 1975,
which was later replaced by the Regional Rural Bank Act 1976. The preamble to the Act
states the objective to develop rural economy by providing credit and facilities for the
development of agriculture, trade, commerce, industry and other productive activities in
the rural areas, particularly to small and marginal farmers, agricultural labourers,
artisans and small entrepreneurs.
The RRB Act
empowers the Central Govt. to open the banks from time to time at places where it may
consider it necessary. A Regional Rural Bank is jointly owned by the Govt. of India, the
Government of concerned state and public sector bank, which sponsored it. The authorised
capital of each bank is Rs. 1 crore and the issued capital is Rs. 25 lakhs; which is held
by them in the proportion of 50, 15 and 35 per cent respectively. Each bank carries the
banking business within the local limits specified by the Govt. notification.
of a RRB is vested in a nine-member Board of Directors headed by
Chairman who is an
officer deputed by a sponsor bank but appointed by the Govt. of India.
Three directors to
be nominated the Central Govt.
Two directors to
be nominated by the concerned State Govt.
iv. Three directors
to be nominated by the sponsor bank.
The sponsor bank,
besides subscribing to the capital and deputing one of its official as chairman, provides
assistance to RRB in several ways such as financial accommodation, deputing managerial and
other staff and arranging the recruitment of staff and their training.
Every RRB may
undertake the following types of functions:
The granting of
loans and advances particularly to small and marginal farmers and agricultural laboursers
individually or to a group, co-operative societies, agricultural processing societies,
co-operative farming societies, etc.
The Granting of
loans and advances to artisans, small entrepreneurs and small traders, businessmen, etc.
The Reserve Bank of
India has brought RRBs under the ambit of priority sector lending on par with the
commercial banks. They have to ensure that forty percent of their advances are accounted
for the priority sector. Within the 40% priority target, 25% should go to weaker section
or 10% of their total advances to go to weaker section.