Potential And Growth Or Regional Rural Bank

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Regional Rural Banks: These banks were first set up in the year 1975 particularly to give direct loans and advances to undersized and minor farmers, agricultural laborers as well as to rural artisans and other of small means. The loans are given for productive purposes to the farmers. There were around 196 RRBs which have been lending around Rs. 3600 crores annually by way of loans to rural people. Over 90 percent of the loans of RPBs are given to the weaker sections in rural areas.

The regional banks, though basically scheduled commercial banks, differ from the latter in certain respects:

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The area of regional rural banks is limited to a specified region comprising one or more districts of a State.

The regional rural banks grant direct loans and advances only to small and marginal farmers, rural artisans and agricultural laborers and other of small means for productive purposes.

The lending rates of the regional rural banks should not be higher than the prevailing lending rates of co-operatives societies in any particular State. The sponsoring banks and the Reserve Bank of India provide many subsidies and concessions to RRBs to enable the latter to function effectively

Concessions to RRBs: From the beginning, the sponsor banks have continued to provide managerial and financial assistance to RRBs and also other concessions such as lower rate of interest on the latter’s borrowing from sponsor banks. Further, the cost of staff deputed to RRBs and training expenses of RRB staff are borne by the sponsor banks. The Reserve Bank of India has been granting many concessions to RRBs.

Progress of RRBs: There are now 196 regional rural banks in 23 States with 14,500 branches. As at the end of September 1990 the regional rural banks had advanced Rs.3,560 crores by way of short-term crop loans, term loans for agricultural activities, for rural artisans, village and cottage industries, retail trade and self employed, consumption loans etc. Nearly 90 percent of the loans of RRBs, were provided to the weaker sections. State wise Uttar Pradesh found large number of offices.

Objectives of RRBs:

RRBs had followed instructions given by RBI and Government of India regarding loan policies, procedures, etc.

The basic aim of setting up RRBs viz, developing the rural economy by providing credit for the development of agriculture, trade, commerce industry and other productive activities in rural areas, was being fulfilled and

RRBs had successfully maintained their image as a small man’s bank by confining their credit facilities to the target groups viz, small marginal farmers, agricultural labourers, artisans and small enterprises for productive activities.

The recovery position on the whole was not satisfactory.

Problems in functioning of RRBs:

On account of the many restrictions place on the business they can undertake,

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