CONCEPT OF rrb’s

Group 2
Devika BORHADE
MANALI SHAH
SWATI PATIL
SWARNA DASARI
URJA DARDE
 Table of Content
 Introduction
 Meaning
 History
 Reforms of Regional Rural Banks
 Recapitalization
 Structure of RRB
 Organizational Structure
 Amalgamation
 Features/ Characteristics
 Roles of RRB
 Functions of RRB
 Product of RRB
 Number of Regional Rural Banks in India
 List of Regional Rural Banks
 Advantages
 Disadvantages
 Key Challenges
 Consolidation of Regional Rural Banks
 Trends
 INTRODUCTION
These banks were established under the provision of the Regional Rural Banks Ordinance 1975, promulgated by the
government on September 27,1975.
The main objective of establishing these banks is to provide credit & other facilities especially to the small & marginal
farmers, agricultural labourer, artisans & small entrepreneur in the rural areas.
RRB is mainly owned by Central government, State government & Public sector bank.
A RRB is popularly known as “GRAMIN BANK”.
The development process of RRB started with the promulgation of an ordinance promulgated on 26 th Sep
1975(which later on was replaced with RRB Act 1976).
It was on 2nd Oct 1975 that th RRB named the Prathma Bank came into existence.
The RRB mobilize deposits primarily from rural/semi-urban areas & provide loans & advances mostly to small &
marginal farmers, agricultural labourers, rural artisans, & other segments of priority sector.
The process was initiated with a view to provide better customer service by having better infrastructure,
computerisation, experienced work force, common publicity & marketing efforts, etc.
 meaning

Regional Rural Banks (RRB’S) were setup as government sponsored regional based rural lending institutions
under the Regional Rural Banks Act 1976. RRB’S were configured as hybrid micro banking institutions,
combining the local orientation & small scale lending culture of the cooperatives & the business culture of
commercial banks. Their mission was to fulfill the credit needs of the relatively unserved sections in the rural
areas, small & marginal farmers, agricultural laborers & socio-economically weaker section.

Regional Rural Banks are local level banking organizations operating in different states of India.
They have been created with a view to serve primarily the rural areas of India with basic banking & financial
services.
 History
• 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 Regional Rural Banks were set up on 2 October 1975,Gandhi Jayanti. These were
set up on the recommendations of The narshimham committee Working Group during the
tenure of Indira Gandhi's Government with a view to include rural areas into economic
mainstream since that time about 70% of the Indian Population was of Rural Orientation.
• The development process of RRBs started on 2 October 1975,Gandhi Jayanti with the forming of
the five RRBs. First RRB, the Prathama Bank, Head Office at Moradabad (U.P.) with authorised
capital of Rs 5 crore at its starting. Prathama bank was sponsored by Syndicate Bank.
• As on 2 October,1975 Out of the remaining four RRBs in the country one was Set up at Malda in
West Bengal under the name of Gaur Gramin Bank,(Sponsored Bank: UCO Bank) which was the
first RRB in the Eastern Region of India. Other three RRBs are Gorakhpur Kshetriya Gramin
Bank, Gorakhpur, U.P.(Sponsored Bank: SBI),Haryana Kshetriya Gramin Bank Bhiwani,
Haryana (Sponsored Bank: PNB),Jaipur-Nagur Anchalik Gramin Bank Jaipur, Rajasthan
(Sponsored Bank: UCO Bank).
 Reforms of Regional Rural Banks

• In line with the reform of the banking system, Expert Groups were constituted to examine the
major issue concerning managerial and financial restructuring of Regional Rural Banks
(RRBs) to devise future course of action in their further reorganization, and to study the role
which could be assigned to self-help groups and NGOs in improving the rural credit delivery
system.
• To ensure that the restructuring of RRBs is sustained and durable, prudential norms were
introduced, in 1996 along the lines of those for commercial banks. RRBs will be required to
adopt new income recognition norms and exposure limits for borrowers. Provisioning norms
were introduced from the year 1996-97.
 Recapitalization
• To review of the financial status of RRBs by the Union Finance Minister in August, 2009, it was felt that a
large number of RRBs had a low Capital to Risk weighted Assets Ratio (CRAR).
• A committee was therefore constituted in September, 2009 under the Chairmanship of K C Chakrabarty,
Deputy Governor, RBI to analyse the financials of the RRBs and to 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 following points were recommended by the
committee:
 RRBs to have CRAR of at least 7% as of 31 March 2011 and at least 9% from 31 March 2012 onwards.
 Recapitalisation requirement of Rs 2,200.00 crore for 40 of the 82 RRBs. This amount is to be released in’
two installments 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.
• The Government of India recently approved the recapitalization of Regional Rural Banks (RRBs) to
improve their Capital to Risk Weighted Assets Ratio (CRAR) in the following manner:
 Share of Central Government i.e. Rs.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 Government of India share
will be contingent on proportionate release of State Government and Sponsor Bank share.
 A capacity building fund with a corpus of Rs.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 in this regard and sent to Government for approval.
 Additional amount of ₹700 crore as contingency fund to meet the requirement of the weak RRBs,
particularly those in the North Eastern and Eastern Region, the necessary provision will be made in the
Budget as and when the need arises.
 Structure Of RRb

• The authorized capital

o fixed at Rs. 1 crore
o Issued capital at Rs. 2 lakhs
 50 %– be subscribed by the Central Government,
 15 %by the concerned State Government
 Rest 35%by the sponsoring bank. 
 Organizational structure
The Organizational structure for RRB’S varies from branch to branch & depends upon the nature & size of
business done by the branch. The Head Office of an RRB normally had three to seven departments.
The following is the list of officers in decreasing order of their rank in the organization.
• Chairman & Managing Director
• Executive Director
• General Manager
• Deputy General Manager
• Assistant General Manager
• Chief Manager
• Senior Manager
• Manager
• Officer
• Assistants
 Amalgamation

• Currently, RRB's are going through a process of amalgamation and consolidation. 25 RRBs
have been amalgamated in January 2013 into 10 RRBs. This counts 67 RRBs till the first
week of June 2013. This counts 56 as of March 2015.
• On 31 March 2016, there were 56 RRBs (post-merger) covering 525 districts with a network
of 14,494 branches. All RRBs were originally conceived as low cost institutions having a rural
ethos, local feel and pro poor focus.
• However, within a very short time, most banks were making losses. The original assumptions
as to the low cost nature of these institutions were belied. This may be again amalgamated in
near future. With the third phase of amalgamation of RRB bringing down the number of such
entities to 38 from 56. As of 1st April 2020, there are 43 RRBs in India.
 Features/characteristics:
• Regional Rural Banks were set up by the Government of India under Regional Rural Banks Act 1976.
• They were established for the purpose of providing credit & other facilities to the small & marginal
farmers, agricultural laborers, artisans & small entrepreneurs in rural areas.
• RRB’S have been jointly setup by the Government of India, the State Government & the sponsored
Commercial bank.
• The shares in RRB’S are held in the following ratios – 50% by Government of India, 35% - by Sponsored
Bank, 15% - by State Government.
• RRB’S operate within specified local limits.
• Initially they were setup with a capital of Rs. 1 crore which has been raised to Rs. 5crore by RRB
amendment act 1987.
• Regional Rural Banks are public sector banks.
• They are authorized to carry on the business of banking as defined in the Banking Regulation Act 1949.
• They are in a position to lend loans to the following categories – Small & Marginal farmers, Agricultural
Laborers both at the individual level & group level, cooperative societies including agricultural
marketing or farmer service societies for agricultural & related operations.
 .

• The management of RRB is vested in nine number board of directors.

• It is headed by Chairman who is appointed by RBI.
• RRB’S were established on 2/10/1975 as per Regional Rural Bank Act 1975.
• The Act was amended as RRB Act 1976.
• The first RRB in the country was Prathma Gramin Bank located in the state of Uttar Pradesh.
 Roles Of RRB
• Providing banking facilities to rural and semi-urban areas.
• RRB’s were mainly established to meet the credit requirement of small and marginal farmer, landless labour and
artisans of rural India with a focus on agro sector.

• Government operations
• Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc.

• Facilities
• Providing Para-Banking facilities like locker facilities, debit and credit cards

• All round development

• Rural banking institutions are playing a very important role for all-round development of rural areas of the country.
In order to support the rural banking sector in recent years, Regional Rural Banks have been set up all over the
country with the objective of meeting the credit needs of the most under privileged sections of the society.

• Flow of credit
• These were envisaged as low cost financial intermediation structure in rural areas to ensure sufficient flow of
institutional credit for agriculture and other rural sectors.

• Local effect
• RRB’s were expected to have the local feel and familiarity of cooperative banks with managerial expertise of the
commercial banks.

• Growth
• RRB’s penetrat4ed to every corner of the country and extended a helping hand in the growth process of the country.
 Functions Of RRB

1. Granting of loans and advances to small and marginal farmers and agricultural labourers,
whether individually or in groups, and to co-operative societies, agricultural processing
societies, co-operative farming societies, primarily for agricultural purposes or for agricultural
operations and other related purposes;
2. Granting of loans and advances to artisans, small entrepreneurs and persons of small means
engaged in trade, commerce and industry or other productive activities within its area of co-
operation; and
3. Accepting deposits
 PRODUCT OF RRB’S

• Retail banking –
• Retail banking also known as consumer banking or personal banking, is the provision of services by a bank to the general
public, rather than to companies, corporations or other banks, which are often described as wholesale banking. Retail
banking is also distinguished from investment banking or commercial banking.
• Banking services which are regarded as retail include provision of savings and transactional accounts, mortgages, personal
loans, debit cards and credit cards.

• Corporate Banking –
• Corporate banking refers to the aspect of banking that deals with corporate customers. Commercial banks make loans that
enable businesses to grow and hire people, contributing to the expansion.
• The services include the provision of credit , cash management facilities, treasury services, employer services.

• Investment banking: -
• Investment bank is a financial services company or corporate division that engages in advisory based financial transactions
on behalf of individuals , corporations and governments.
• Investment banks provide four primary types of services – raising capital, advising in mergers and acquisition , executing
securities sales and trading and performing general advisory services
 PRODUCT OF RRB’S
• Internet banking: -
• Online banking allows a user to conduct financial transactions via the internet . Online banking is also known as internet banking or web banking.
Online banking offers customers almost every service traditionally available through a local branch including deposits, transfers, and online bill
payments.
• Internet banking services provide for bill payment services, fund transfer, credit card customers, railway pass, shopping, recharging your prepaid
phone.

• Mobile banking: -
• Mobile banking is the act of making financial transaction on a mobile device (cell phone, tablet, etc ). This activity can be as a
simple as a bank sending fraud or usage activity to a clients cell phone or as complex as a client paying bills or sending money
abroad.
• Mobile banking services include portfolio management services , content services , handset accessibility , access to card
statements, insurance policy management .

• Mortgage Loan–
•  A mortgage loan is a type of secured loan where you can avail funds by providing your asset as collateral to the lender. This is a
popular form of financing as it helps the borrower avail a high loan amount and prolonged repayment tenor.
• A mortgage is usually a loan sanctioned against an immovable asset like a house or a commercial property. The lender keeps the
asset as collateral until the borrower repays the total loan amount.
• Mortgage loans are of 3 types:
• Home loans
• Commercial property loans
• Loans against properties
 PRODUCT OF RRB’S
• Wealth Management: -
• Wealth management is an investment advisory service that combines other financial services to address the needs of affluent
clients. It is a consultative process whereby the advisor gleans information about the client's wants and tailors a bespoke
strategy utilizing appropriate financial products and services.
• A wealth management advisor or wealth manager is a type of financial advisor who utilizes the spectrum of financial
disciplines available, such as financial and investment advice, legal or estate planning, accounting, and tax services, and
retirement planning, to manage an affluent client's wealth for one set fee. Wealth management practices differ depending on
the nation, such as if you are in the United States versus Canada.

• Insurance: -
• Insurance is a legal contract between two parties- the insurance company (insurer) and the individual (insured), wherein the
insurance company promises to compensate for financial losses due to insured contingencies in return for the premiums paid
by the insured individual.
• In simple words, insurance is a risk transfer mechanism, where you transfer your risk to the insurance company and get the
cover for financial loss that you may face due to unforeseen events. And the amount that you pay for this arrangement is called
premium.
• The concept of insurance works on the basis of ‘risk pooling’. When you buy any type of insurance policy from the insurance
company for a specified period with specific cover, you will make regular payments (referred to as premiums) towards the
policy. 
• Types of insurance available
• Life insurance products

• General insurance products

 Number of Regional Rural Banks in India

• Currently, Regional Rural Bank are going through a process of amalgamation and consolidation. We
have a list of number of RRBs
•  Number of RRBs from the initial date
•  Dec 1975:- 6 RRBs
•  Dec 1980:- 85 RRBs
•  Dec 1985:- 188 RRBs
•  Mar 1990:- 196 RRBs
•  Mar 2006:- 133 RRBs
•  Mar 2011:- 82 RRBs
•  Mar 2013:- 64 RRBs
•  Mar 2014:- 57 RRBs
•  Mar 2016:- 56 RRBs
•  Jan 2019:- 45 RRBs
•  April 2020:- 43 RRBs
 LIST OF Regional rural banks
• Andhra Pragathi Grameena Bank • Jharkhand Rajya Gramin Bank • Punjab Gramin Bank
• Andhra Pradesh Grameena Vikas • Karnataka Gramin Bank • Baroda Rajasthan Kshetriya Gramin
Bank Bank
• Karnataka Vikas Grameena Bank
• Chaitanya Godavari Gramin Bank
• Kerala Gramin Bank • Rajasthan Marudhara Gramin Bank
• Saptagiri Gramin Bank
• Madhyanchal Gramin Bank • Tamil Nadu Grama Bank
• Arunachal Pradesh Rural Bank
• Madhya Pradesh Gramin Bank • Telangana Grameena Bank
• Assam Gramin Vikash Bank
• Maharashtra Gramin Bank • Tripura Gramin Bank
• Dakshin Bihar Gramin Bank
• Vidharbha Konkan Gramin Bank • Aryavart Bank
• Uttar Bihar Gramin Bank
• Manipur Rural Bank • Prathama UP Gramin Bank
• Chhattisgarh Rajya Gramin Bank
• Meghalaya Rural Bank • Baroda UP Bank
• Baroda Gujarat Gramin Bank
• Mizoram Rural Bank • Uttarakhand Gramin Bank
• Saurashtra Gramin Bank
• Nagaland Rural Bank • Paschim Banga Gramin Bank
• Sarva Haryana Gramin Bank
• Odisha Gramya Bank • Bangiya Gramin Vikash Bank
• Himachal Pradesh Gramin Bank
• Utkal Grameen Bank • Uttarbanga Kshetriya Gramin Bank
• J&K Grameen Bank
• Puduvai Bharathiar Grama Bank
• Ellaquai Dehati Bank
 ADVANTAGES
• Service at Doorstep: Taking the banking services to the doorstep of rural masses, particularly in unbanked
rural areas.
• Identifying Financial Needs: Identify the financial need of the people especially in rural areas & help them to
meet their requirement of meeting finance.
• Cheaper Loans to Weaker Section: Making available institutional credit to the weaker section of the society
who had by far little or no access to cheaper loans & had been depending on the private money lenders.
• Enhancement of Banking Facilities: To enhance banking & financial facilities in backward or unbanked areas.
• Mobilization & channelization of Rural Savings: Mobilize rural savings & channelize them for supporting
productive activities in rural areas.
• Providing Finance: To provide finance to the weaker sections of society like small farmers, rural artisans,
small producers, rural laborers, etc.
• Supplementary Channel: To create a Supplementary channel for the flow the central money market to the
rural areas through refinances.
 DISADVANTAGES
• Haste and Lack of Coordination in Branch Expansion: Haste in branch expansion programme in many cases
has resulted in lop-sidedness due to lack of coordination. In several cases, it could not be ensured that the
branches of the RRB’S are opened at centers where no commercial or cooperative banking facilities were
provided.
• Difficulties in Deposit Mobilization: The RRB’S encountered a number of practical difficulties in deposit
mobilization. On account of their restrictive lending policy which excludes richer sections of the village
society, these potential depositors shows least interest in depositing their money with these banks.
• Constraints in Deposit Mobilizations: The RRB’S exclude the richer sections of the village society in providing
direct financial assistance. These sections have potential savings to deposit but they are least interested in
depositing them with the RRB’S in view of the restrictive credit policy of these banks.
• Slow Progress in Lending Activity: The RRB’S pace of growth in loan business is slow. For this the following
reasons may be given: i) There have been limited scope for direct lending by RRB’ S in their fields of operation
ii) It is always difficult to identify the potential small borrowers & the bank staff have been required to make
special & sincere efforts in this regard.
• Urban-Orientation of Staff: A crucial practical difficulty experienced in their working by the RRB’ S is the
urban orientation of the staff which is rarely inclined to serve in rural areas. There is no true local
involvement of the bank staff in the village where they serve.
• Procedural Rigidity: The RRB’S follows the procedures of the scheduled commercial banks in the matter of
deposits & advancing loan which are highly complicated & time consuming from the villagers point of view.
 Key challenges
• Slow Progress: The progress of RRB’S is not up to expectations & is slow when comparing with other
types of banks because of many restrictions on their operations.
• Limited scope of Investment: The basic objective of RRB’S was to provide credit facilities to poor &
weaker sections of society, i.e., to small & marginal farmers & other weaker sections. They were originally
having limited scope to invest their surplus funds freely.
• Delay in decision making: The RRB’S controlled directly & indirectly by various agencies, i.e. the
sponsoring bank, NABARD, RBI, besides Central Government . Thus it takes long time to take decision
on some important issues.
• Lack of Coordination: Lack of coordination between the RRB’S & banks regarding branch expansion,
policy making etc. are also the important causes for the slow progress of RRB’ S.
• Difficulties in deposit mobilization: The RRB’S are aiming at catering to the needs of poor & are not
serving the needs of the rich. So the RRB’S are not able to attract the deposit from that potential sector.
• Lack of training facilities: Generally the staff of RRB’S urban-oriented & they may not know the problems
& conditions of rural areas. Lack of training facility concerning these areas also affects the growth of
RRB’S.
 .

• Poor recovery rates: The recovery performance of the RRB’S is not up to the mark. The rate of recovery is
respect of many RRB’S is around 55% only.
• Capital inadequacy: The capital adequacy is the very basis to financial soundness. There is capital
inadequacy in RRB’S as most of the RRB’S have huge losses in their balance sheet eating away all the
capital of RRB’S.
 Consolidation of Regional Rural Banks
• The Government has taken the initiative of consolidating Regional Rural Banks (RRBs) sponsored by the
same bank within a state. This would widen the sphere and area of banks’ operation and strengthen their
functioning with a view to increase the flow of credit in the rural areas.
• In terms of Section 23 of the Regional Rural Banks Act, 1976, the sponsor bank NABARD and the State
Governments concerned have already given their concurrence for the proposed amalgamation of 14
RRBs.
• Thus the process of merger in 196 RRBs, spread over 14,496 branches in 518 districts in India has quietly
begun. A host of PSBs have taken a decision to merge some of their RRBs on a state-wise basis. The
Government took systematic merger plan of RRBs on state-wise basis and one RRB started to function in
each state province on 31st August, 2005 and as a result, the number of Regional Rural Banks (RRBs) had
reduced to 92 from 196 due to amalgamation of RRBs sponsored by the same bank in a state.
• The number of loss making RRBs reduced to 15 in 2006-07 from 22 in 2005-06. Of these seven have
registered profit during the first half of 2007-08 and the remaining four posted profit by the end of 2007-
08. The performance of RRBs has improved considerably as the percentage of their gross NPAs and net
NPAs has reduced.
• The net Worth of RRBs as a whole increased to Rs 4,545.86 crore as on March 31, 2007 from Rs 3,466.25
crore as on March 31, 2005.
 Trends
• RRB Act was further amended during the year as RRB act 1987 & the following are the challenges as per
the amendment made during 1987:
• The authorised capital was raised from 1 crore to 5 crore, the chairman is to be appointed by the
concerned sponsor bank in consultation with NABARD.
• The sponsor banks have to subscribe to the share capital as well as impart training to personnel & provide
managerial & financial assistance for the first five years of the functioning. Amalgamation of two or more
RRB’S can be done in consultation with NABARD. Concern state government & the sponsor bank.
• Sponsor bank have been empowered to monitor the progress of their RRB’ S from time to conduct
inspections internal audits & to suggest measures to RRB’ S wherever necessary.
• From July 5, 2007 RBI has allowed RRB’S to accept foreign currency deposits from NRI’s & persons of
Indian origin.
• In Tamilnadu there are two Regional Rural Bank – Pandian Gramin Bank sponsored by Indian Overseas
Bank & Pallavan Gramin Bank sponsored by Indian Bank.
• At present there are 46 RRB’S functioning in India as of 1st April 2020.
 .

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