Role of regional rural banks in rural development
The Narasimham committee on rural credit recommended the establishment of Regional Rural Banks (RRBs) on the ground that they would be much better suited than the commercial banks or co-operative banks in meeting the needs of rural areas. Accepting the recommendations of the Narasimham committee, the government passed the Regional Rural Banks Act, 1976. A significant development in the field of banking during 1976 was the establishment of 19 Regional Rural Banks (RRBs) under the Regional Rural Banks Act‚1976.
The RRBs were established “with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto” .
RRBs established with the explicit objective of
- Bridging the credit gap in rural areas
- Check the outflow of rural deposits to urban areas
- Reduce regional imbalances and increase rural employment generation
The main objectives of setting up the RRB is to provide credit and other facilities‚ especially to the small and marginal farmers‚ agricultural labourers artisans and small entrepreneurs in rural areas.
Each RRB will operate within the local limits specified by notification.
If necessary‚ a RRB will also establish branches or agencies at places notified by the Government.
Each RRB is sponsored by a public sector bank‚ which provides assistance in several ways‚ viz., subscription to its share capital‚ provision of such managerial and financial assistance as may be mutually agreed upon and help the recruitment and training of personnel during the initial period of its functioning.
Every RRB is authorized to carry on to transact the business of banking as defined in the Banking Regulation Act and may also engage in other business specified in Section 6 (1) of the said Act. In particular‚ a RRB is required to undertake the business of
(a) granting loans and advances to small and marginal farmers and agricultural laborers‚ whether individually or in groups, and to cooperative societies‚ including agricultural marketing societies‚ agricultural processing societies‚ cooperative farming societies‚ primary agricultural credit societies or farmers’ service societies‚ primary agricultural purposes or agricultural operations or other related purposes, and
(b) granting loans and advances to artisans‚ small entrepreneurs and persons of small means engaged in trade‚ commerce‚ industry or other productive activities‚ within its area of operation.
The Reserve Bank of India has brought RRB’s 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...