Regional Rural Banks in India

Narashima committee established regional rural banks according the needs of the rural area, the committee thought that RRB would be much better for the rural population than commercial banks or any other commercial banks. considering all the above the government decide to pas regional rural banks Act, 1975. This ACT lead to the formation of 25 regional rural banks in the same year at present there are 196 regional rural banks in the country.

The main objective and the function of the regional rural bank is, in the rural area there are not much commercial banks their main aim was to develop a commercial organization to the rural mass which was supposed to happen to regional rural bank. The incorporation of regional rural banks came up with many regulations which would help in the development of the economy of the country by providing credit to the rural farmers, trade etc. The functioning of the rural banks are limited to certain areas and of the different districts of the different states in the country, it will be usually found in the districts heads of the different states, RRB is been regulated and formulated by NABARD under the governance of the central government and other commercial sponcer banks.

Each and every regional rural bank in the country in been sponsored by one or the other public sector banks. It is the duty of the public-sector banks to provide necessary Aid and assist to the regional rural banks, these public sector banks helps in the training and development of employees of the RRB, they also help in subscribing for the share and also provide necessary managerial direction along with financial aid. But the managerial or financial assistance will be provided for the term of 5 years and not more than the period can be increased by permission from the central and the respective state government along with the regulations of NABARD.

The capital requirement of the regional bank is been provided by the central government, state governments and some sponsor public sector banks with the amount of 5crors, this capital amount is in the ration of 50% is been contributed by the central government, 35% sponsored public sector banks and 15% from the state government. All the regional rural banks in the country are authorized to carry out their business transaction according the banking regulation ACT ,1949. RRB provides all the important facilities provided by the domestic banks to the rural population like providing advance loans, credits, accept the deposited and provide remittance to the rural population along with that they also they also invest in the other banks and various types of financial institutions which are prescribed by banking regulation ACT and NABARD, they also invest in government securities.

Schemes Of DICGC is been followed by RRB which also observe after the cash reserve ration and statutory liquidity ratio of the regional rural banks which is stipulated by reserve bank of India. Reserve bank of India has brought regional rural bank under the priority sector after 1997, commercial banks are supposed to provide 40% of their net bank credit to the priority sector, in the same manner regional rural banks are also should provide 25% of their public sector banks advances as reserve or provide 10% of their net bank credit to the weaker section of the societies, RRB’s are also sponsored by commercial banks for which notification has to be received from the central government, regional rural banks can open its branches in the state as well as in the other states and deal with the rural people of the other states. At present the maximum coverage of the regional rural banks are in 8 dirstricts.

The regional rural banks in the country is being governed by the board of directors from different rogations appointed by the central and the state government, one chairman is been appointed for the term of 5 years by the central government, though the chair man is been appointed by the central government but this chairman will be from one the commercial banks which sponsors one of the regional rural bank, 2 members are appointed by the state government for the term of 5 years and 3 members are appointed for the term of 5 years from the commercial banks. All together NABARD regulated the regional rural banks. They can also call for any inspection of the regional rural banks. Regional rural banks need prior permission from the reserve bank of India and NABARD to open any branches. This application will be further sent by NABRD to RBI for seeking of the license. NABARD is also responsible for the managing of the regional rural banks. NABARD also provides refinancing facilities to the various regional rural banks.