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Regional Rural Banks (RRBs)
Context:
The Union Finance Minister Nirmala Sitharaman urged Regional Rural Banks (RRBs) to enhance their share in ground-level agriculture credit disbursement, with a particular focus on allied agricultural activities such as dairy, animal husbandry, and fisheries.
More on News:
- Chairing a review meeting in Patna, she assessed the performance of eight RRBs operating across Bihar, Jharkhand, Odisha, and West Bengal.
- She also directed Uttar Bihar Gramin Bank to boost credit flow toward fisheries and foxnut (makhana) to harness the full potential of these sectors in the region.
- She also acknowledged significant improvements in the financial health of RRBs in the eastern region.
Regional Rural Banks (RRBs):
Regional Rural Banks (RRBs) play a vital role in providing banking services to the rural population of India, primarily focusing on small and marginal farmers, agricultural laborers, and other underserved communities.
Overview of Regional Rural Banks (RRBs)
- Establishment: RRBs were created in 1975 following the recommendations of the Narasimhan Committee on Rural Credit.
- Established under the Regional Rural Banks Act of 1976, RRBs aim to enhance the rural economy by facilitating access to credit and financial services.
- The first RRB, Prathama Bank, was set up on October 2, 1975.
- Ownership Structure: The ownership of RRBs is divided among the Government of India (50%), sponsoring banks (35%), and state governments (15%).
- Functions: RRBs provide a range of services including:
- Credit facilities for agriculture and rural development.
- Banking services such as savings accounts, loans, and government subsidy disbursements.
- Para-banking services like mobile banking and Internet banking.
Key Features
- Target Audience: RRBs focus on serving rural and semi-urban populations, aiming to integrate them into the formal banking system.
- Area of Operation: Each RRB operates in specific districts as notified by the government, ensuring localised service delivery.
- The RBI has set a Priority Sector Lending (PSL) target of 75% of total outstanding advances for RRBs as against 40% for Scheduled Commercial Banks.
- Regulation: Regional Rural Banks are regulated by the RBI and supervised by the National Bank for Agriculture and Rural Development (NABARD).
- Amalgamation: Many RRBs have undergone amalgamation to improve efficiency and service delivery.
- The number of RRBs has reduced from 196 in 2005 to 43 as of April 2020, allowing for better resource management and operational capacity.
Issues Faced by RRBs:
- Operational Costs: Rising operational costs compared to scheduled commercial banks can hinder profitability.
- Limited Activities: Many branches struggle with low business volumes, leading to financial losses.
- Technology Adoption: Limited access to modern banking technologies such as Internet banking hampers service delivery.
