Regional Rural Banks (RRBs) were established in India in 1975 to provide banking facilities to rural areas. They are jointly owned by the central government, state government and sponsoring commercial bank. RRBs focus on providing credit and banking services to small and marginal farmers, agricultural laborers and small businesses in rural areas. They accept deposits and offer loans, remittance facilities, and other banking services. However, over time RRBs have faced issues like inadequate finances, high loan defaults, and lack of coordination with other financial institutions which has impacted their effectiveness in developing rural regions of India.

1. Regional Rural Bank

2. Classification of banking
system

3. Regional Rural Banks
• Regional Rural Banks (RRBs) are government owned scheduled
commercial banks of India that operate at regional level in different states
of India.
• These banks are under the ownership of Ministry of Finance, Government
of India. They were created to serve rural areas with basic banking
and financial services. However, RRBs also have urban branches.
• The area of operation is limited to the area notified by the government of
India covering, and it covers one or more districts in the State.
• RRBs perform various functions such as providing banking facilities to
rural and semi-urban areas, carrying out government operations like
disbursement of wages of MGNREGA workers and distribution of pensions,
providing para-banking facilities like locker facilities, debit and credit
cards, mobile banking, internet banking, and UPI services.

4. History of RRB
• Regional Rural Banks were established under the provisions of an
ordinance passed on 26 September 1975 and the RRB Act 1976 to provide
sufficient banking and credit facility for agriculture and other rural sectors.
As a result, five RRBs were set up on 2 October 1975 on the
recommendations of the Narsimham Committee on Rural Credit, during
the tenure of Indira Gandhi's government. The purpose was to include
rural areas into the economic mainstream since around 70% of the Indian
population was rural.
• Prathama Bank, with head office in Moradabad, Uttar Pradesh was the first
RRB. It was sponsored by Syndicate Bank and had an authorised capital of
Rs. 5 crore. The other four RRBs were Gaur Gramin Bank (sponsored
by UCO Bank), Gorakhpur Kshetriya Gramin Bank (sponsored by State
Bank of India), Haryana Kshetriya Gramin Bank (sponsored by Punjab
National Bank), and Jaipur-Nagpur Anchalik Gramin Bank (sponsored
by UCO Bank).
• The RRBs were owned by the central government, state government, and
the sponsoring bank with 50%, 15%, and 35% shareholding respectively.

5. The scheme of Regional
Rural Banks
• The Government thought of instituting rural banks as part of its Twenty-
Point Programme, also referred to as the New Economic Programme, in
1975, inspired by considerations of lowering the costs of rural banking and
operating such banks with local staff in a homely atmosphere of the
villages.
• The Government of India then appointed a Working Group on Rural
Banks, headed by Shri M. Narasimah, to examine in detail the issues
involved in the establishment of new rural banks as subsidiaries of the
public sector banks to deal with the problem of rural finance. The Working
Group submitted its report on July30,1975.
• The Working Group, howevere, conceieved a grossly different idea from
the concept of ‘rural banks’ advocated by the banking Commission. The
Group recommended the establishment of state-sponsored regionally based
and rural oriented commercial banks called Regional Rural banks.

6. • Based on the recommendation and after due consideration of the scheme
suggested by the Narasimah Committee’s Report, the Government of India
instituted Regional Rural Banks Ordinance, 1975, promulgated by the
President of India on September 26, 1975.
Subsequently, on February 9, 1976, the Government of India passed the
Regional Rural Banks Act, 1976, with clarification on some issues.

7. Organizational structure
The organizational structure for RRB's varies from branch to branch and
depends upon the nature and size of business done by the branch. The head
office of an RRB normally had three to nine departments. The following is the
decision making hierarchy of officials in a RRB.
• Board of Directors
• Chairman & Managing Director
• General Manager
• Assistant General Manager
• Regional Manager/Chief Manager
• Senior Manager
• Manager
• Officer
• Office Assistant
• Office Attendant

8. Objectives of RRBs
• To provide cheap and liberal credit facilities to small and marginal farmers,
agriculture labourers, artisans, small entrepreneurs and other weaker
sections.
• To save the rural poor from the moneylenders.
• To act as a catalyst element and thereby accelerate the economic growth
in the particular region.
• To cultivate the banking habits among the rural people and mobilize
savings for the economic development of rural areas.
• To increase employment opportunities by encouraging trade and
commerce in rural areas. To encourage entrepreneurship in rural areas.
• To cater to the needs of the backward areas which are not covered by the
other efforts of the Government.
• To develop underdeveloped regions and thereby strive to remove
economic disparity between regions. Identify the financial need specially in
rural areas
• To enhance banking and financing facilities in backward or unbanked areas
• To provide finance to co-operative societies, primary credit societies,
Agricultural marketing societies. Enhance & Improve banking facilities to
semi urban, rural and other untapped market.

9. Functions of Rural Banks
According to the Banking Commission, the rural banks
should render the following functions:
To accept deposits
To grant advances
To provide ancillary banking services
To provide assistance in the marketing of their products
To help in the overall development of villages in its area
To extend credit and all other banking services
etc…

10. Review (1986) of RRBs
by committee
The Reserve Bank of India had constituted a Working Group on RRBs, under
the chairmanship of Shri S. M. Kelkar, to review the various aspects of the
working of the RRBs. The Group submitted its Report in June 1986.
Following are the major recommendations of the Kelkar Group:
1) The RRBs should be permitted to increase their authorised share capital from
Rs.1 crore to Rs.5 crores and issued capital from Rs.25 lakhs to Rs.1 crore.
2) The sponsor banks should, on behalf of RRBs, invest the deposits kept by
them in current account for SLR requirement in government securities.
3) The sponsor banks should lower the rate of interest on refinance from 8.5
percent to 7 percent.
4) New RRBs should be established only in consideration of the genuine need to
serve a neglected area, especially tribal areas and people.
5) The coverage of RRBs be restricted to 2 districts in order to have a better
supervision ad control of their branches.

11. Review of RRBs (2009)
• A review of the RRBs on August 2009 by the Union Finance Minister
revealed that a large number of RRBs had a low Capital to Risk weighted
Assets Ratio (CRAR). A committee was constituted in September 2009
under the chairmanship of K C Chakraborty,[4] the deputy governor of
the Reserve Bank of India (RBI) to analyse the financials of the RRBs and
suggest measures, including re-capitalisation to bring the CRAR of RRBs to
at least 9% in a sustainable manner by 2012. The committee submitted its
report in May 2010.
• The committee recommended RRBs to have a CRAR of at least 7% on 31
March 2011 and at least 9% from 31 March 2012 onwards. The
recapitalization requirement of Rs 2,200.00 crore for 40 of the 82 RRBs
were to be released in two instalments in 2010–11 and 2011–12. The
remaining 42 RRBs will not require any capital and will be able to maintain
CRAR of at least 9% as of 31 March 2012 and thereafter, on their own. A
fund of ₹100 crore to be set up for training and capacity building of the
RRB staff.[5]
• The Government of India approved the recapitalization of the RRBs to
improve their CRAR in the following manner:

12. Progress and recapitalization
• Share of central government, that is, ₹1,100 crore will be released as per
provisions made by the Department of Expenditure in 2010-11 and 2011–
12. However, release of the funds will be contingent on proportionate
release of the state government and sponsor bank share.[5]
• A capacity building fund with a corpus of ₹100 crore to be set up by
central government with NABARD for training and capacity building of the
RRB staff in the institution of NABARD and other reputed institutions. The
functioning of the fund will be periodically reviewed by the central
government. An action plan will be prepared by NABARD and sent to the
government for approval.
• An additional amount of ₹700 crore was set up as a contingency fund to
meet the requirement of the weak RRBs, particularly those in the north-
eastern and the eastern region.

13. Business which a Regional Rural
Bank may transact
• Every Regional Rural Bank shall carry on and transact the business of
banking as defined in clause (b) of section 5 of the Banking Regulation
Act, 1949 (10 of 1949), and may engage in one or more forms of business
specified in sub-section (1) of section 6 of that Act.
• Without prejudice to the generality of the provisions of sub-section (1),
every Regional Rural Bank may, in particular, undertake the following
types of business, namely:—
(a) the granting of loans and advances, particularly to small and
marginal farmers and agricultural labourers, whether individually or
in groups, and to co-operative societies, including agricultural
marketing societies, agricultural processing societies, co-operative
farming societies, primary agricultural credit societies or farmers’
service societies, for agricultural purposes or agricultural operations
or for other purposes connected therewith;
(b) the granting of loans and advances, particularly to artisans,
small entrepreneurs and persons of small means engaged in trade,
commerce or industry or other productive activities, within the
notified area in relation to the Regional Rural Bank

14. Major Problems Faced By RRBs
• RRB’s are facing the problem of inadequate finance. They are dependent on NABARD
to collect finance for their further operation. Poor rural people are unable to save
anything due to poverty and low per capita income. The low level of saving of these
customer create obstacle for RRB’s to collect sufficient deposits.
• High over dues and poor recovery of loan is one of the biggest concern affecting the
functioning of RRB’s. Reasons being poor access of granting loan, insufficient and
untrained staff, unproductive or less productive use of credit, inadequate
production, poor marketing facilities and improper channel of recovery system.
• There is also a problem of regional imbalance in banking facilities provided by RRB’s.
They are creating this problem by concentrating their branches in some specific
states and districts & loose other prospective group of customers.
• Many RRB’s are suffering from the problem of heavy loans because of low repaying
capacity of their customer, untrained staff, low level of deposits and heavy sanction
of loan without checking the creditworthiness of their customers.
• These banks have still not played a significant role in poverty alleviation of the
country. Although various efforts have been made in this regard but lack of
economic infrastructure, poor marketing strategies, poor knowledge of customers,
low production, low awareness about savings have created many hurdles for RRB’s.
• Lack of proper co-ordination between RRB’s and other financial institution like
commercial banks, NABARD and other co-operative bank has badly affected the
performance of these banks

15. List of Regional Rural banks
There are 43 RRBs in since 1 April 2020
Andhra Pradesh
• Andhra Pragathi Grameena Bank
• Andhra Pradesh Grameena Vikas Bank
• Chaitanya Godavari Gramin Bank
• Saptagiri Gramin Bank
Arunachal Pradesh
• Arunachal Pradesh Rural Bank
Assam
• Assam Gramin Vikash Bank
Bihar
• Dakshin Bihar Gramin Bank
• Uttar Bihar Gramin Bank
Chhattisgarh
• Chhattisgarh Rajya Gramin Bank
Gujarat
• The Gujarat State Co.op Agriculture & Rural Development Bank Ltd.
• Baroda Gujarat Gramin Bank
• Saurashtra Gramin Bank
Haryana
• Sarva Haryana Gramin Bank
Himachal Pradesh
• Himachal Pradesh Gramin Bank
Jammu and Kashmir
• J&K Grameen Bank
• Ellaquai Dehati Bank

16. Jharkhand
• Jharkhand Rajya Gramin Bank
Karnataka
• Karnataka Gramin Bank
• Karnataka Vikas Grameena Bank
Kerala
• Kerala Gramin Bank
Madhya Pradesh
• Madhyanchal Gramin Bank
• Madhya Pradesh Gramin Bank
Maharashtra
• Maharashtra Gramin Bank
• Vidharbha Konkan Gramin Bank
Manipur
• Manipur Rural Bank
Meghalaya
• Meghalaya Rural Bank
Mizoram
• Mizoram Rural Bank
Nagaland
• Nagaland Rural Bank
Odisha
• Odisha Gramya Bank
• Utkal Grameen Bank
Puducherry
• Puduvai Bharathiar Grama Bank
Punjab
• Punjab Gramin Bank
Rajasthan
• Baroda Rajasthan Kshetriya Gramin Bank
• Rajasthan Marudhara Gramin Bank
Tamil Nadu
• Tamil Nadu Grama Bank
Telangana
• Telangana Grameena Bank
Tripura
• Tripura Gramin Bank
Uttar Pradesh
• Aryavart Bank
• Prathama UP Gramin Bank
• Baroda UP Bank
Uttarakhand
• Uttarakhand Gramin Bank
West Bengal
• Paschim Banga Gramin Bank
• Bangiya Gramin Vikash Bank
• Uttarbanga Kshetriya Gramin Bank
•

17. RRBs in India

18. Difference between RRBs and
commercial banks
RRB also known as Regional Rural Bank and commercial banks performs quite
similar functions, however there is some difference between the two. Let’s
look at the difference between RRB and commercial banks –
1. While the main reason behind the existence of RRB is the development
of rural and backward areas, and also providing banking facility to rural
population whereas the main reason behind the existence of commercial
banks is to make profits out of their operations.
2. Scope of RRB is limited to agriculture finance, small sector loans,
handicrafts and other small sector loans, whereas scope of commercial
banks is wide and it not only provides agriculture finance but also
housing loan, car finance, letter of credit, credit to big companies and for
many activities.
3. RRB is present in rural and semi urban areas only whereas commercial
banks do operations in all over the country that is rural, semi urban and
urban areas.

19. Difference between RRBs and
commercial banks
4. While the focus of RRB is more on accepting deposits and granting of loans
to the people whereas the focus of commercial banks apart from lending and
borrowing is on many other services like stock broking, asset management,
insurance, merchant banking, venture capital financing, foreign exchange
related business etc…
5. Stakeholders of RRB include government of India, state government and
commercial banks whereas stakeholders of commercial banks are public,
central government etc…

20. Role of RBI / NABARD and Co-operative
Banks in Promoting Rural Credit
• All-India Rural Credit Survey Committee submitted its
monumental report in 1954.
• The Survey Committee had found that while the co-operative
societies and government provided only 3% each of the loans
raised by the cultivator, the private credit agencies (the
moneylender and the trader) lent more than 70% of what the
cultivator borrowed.
• The moneylender changed very high rates of interest and did not
concern himself with the purpose of the loan.
The Survey Committee recommended an ‘integrated scheme
of rural credit’, of which the main features were:
• State partnership in co-operative credit institutions through
contribution to their share capital;
• Full co-ordination between credit and other economic activities
especially marketing and processing; and
• Administration through adequately trained and efficient personnel,
responsive to the needs of the rural population.

21. Role of RBI in rural banking
• Short term refinance facility for agriculture & allied
activities.
• Development of cooperative credit institutions
• Expansion of sources of fund for short & long term for rural
credit.
• Training and professionalism of cooperative credit societies.
• Conducting rural credit surveys to determine the courage of
rural household by credit institution.
• Helping bank branch expansion in rural areas to facilitate
loans.
• Guidance to all matters concerned on rural credit.

22. NABARD Establishment
• National Bank for Agriculture and Rural
Development (NABARD) is an apex regulatory body for overall
regulation of regional rural banks and apex cooperative banks in
India.
• It is under the jurisdiction of Ministry of Finance, Government of
India.[5]
• The bank has been entrusted with "matters concerning policy,
planning, and operations in the field of credit for agriculture and
other economic activities in rural areas in India". NABARD is
active in developing and implementing financial inclusion.
• NABARD was established on the recommendations of
B.Sivaramman Committee (by Act 61, 1981 of Parliament) on 12
July 1982 to implement the National Bank for Agriculture and
Rural Development Act 1981.

23. Replacement of ACD & ARDC
by NABARD
• It replaced the Agricultural Credit Department (ACD) and
Rural Planning and Credit Cell (RPCC) of Reserve Bank of
India, and Agricultural Refinance and Development
Corporation (ARDC). It is one of the premier agencies
providing dRs.14080 crore (100% share). The authorized
share capital is Rs.30,000 crore
• International associates of NABARD include World Bank-
affiliated organisations and global developmental agencies
working in the field of agriculture and rural development.
These organisations help NABARD by advising and giving
monetary aid for the upliftment of the people in the rural
areas and optimising the agricultural process.

24. Role of NABARD
• NABARD has been instrumental in grounding rural, social innovations and
social enterprises in the rural hinterlands.
• As of May 2020, NABARD operates at 32 Regional Offices in the country.
• It has in the process partnered with about 4000 partner organisations in
grounding many of the interventions be it, SHG-Bank Linkage programme,
tree-based tribal communities’ livelihoods initiative, watershed approach in
soil and water conservation, increasing crop productivity initiatives
through lead crop initiative or dissemination of information flow to
agrarian communities through Farmer clubs.
• NABARD is the most important institution in the country which looks after
the development of the cottage industry, small scale industry and village
industry, and other rural industries.
• NABARD also reaches out to allied economies and supports and promotes
integrated development.

25. Role of NABARD continues..
• Serves as an apex financing agency for the institutions providing investment
and production credit for promoting the various developmental activities in
rural areas
• Takes measures towards institution building for improving absorptive capacity
of the credit delivery system, including monitoring, formulation of rehabilitation
schemes, restructuring of credit institutions, training of personnel, etc.
• Co-ordinates the rural financing activities of all institutions engaged in
developmental work at the field level and maintains liaison with Government of
India, state governments, Reserve Bank of India (RBI) and other national level
institutions concerned with policy formulation
• Undertakes monitoring and evaluation of projects refinanced by it.
• NABARD refinances the financial institutions which finances the rural sector.
• NABARD partakes in development of institutions which help the rural economy.
• NABARD also keeps a check on its client institutes.
• It regulates the institutions which provide financial help to the rural economy.
• It provides training facilities to the institutions working in the field of rural
upliftment.
• It regulates and supervise the cooperative banks and the RRB's, throughout
entire India.

26. NABARD structure and linkages
• NABARD has its head office at Mumbai, India and regional offices in all
states and one special cell at Srinagar J&K. The Regional Office[RO] is
headed by a Chief General Manager [CGMs] as Officer Incharge, and the
Head office has several top executives viz the Directors, Deputy Managing
Directors[DMD], and the Chairperson. The Board of Directors are
appointed by the Government of India in consonance with NABARD Act. It
has 336 District Offices across the country which are staffed by District
Development Managers (DDMs). It also has six training establishments.
• NABARD is also known for its 'SHG Bank Linkage Programme' which
encourages India's banks to lend to self-help groups (SHGs). Largely
because SHGs are composed mainly of poor women, this has evolved into
an important Indian tool for microfinance. By March 2006, 22 lakh SHGs
representing 3.3 crore members had to be linked to credit through this
programme.
• NABARD also has a portfolio of Natural Resource Management
Programmes involving diverse fields like Watershed Development, Tribal
Development and Farm Innovation through dedicated funds set up for the
purpose.

27. Thank You!