Short Note on Regional Rural Banks

By | February 7, 2018

➡ What are Regional Rural Banks
• Five Regional Rural Banks (RRBs) were first set up on October 2, 1975 with the aim to take banking services to the doorsteps of the rural masses specially in the remote areas having no access to banking services to fulfill the twin duties of
(i) Providing credit to the society at concessional rate of interest who previously depended on private money lending, and
(ii) Mobilizing rural savings and channelise them for supporting productive activities in the rural areas.

• The Union Government, the concerned State Government and the sponsoring nationalized bank contribute the share capital in the proportion of 50:15:35.

• Following the suggestions of the Kelkar Committee, the government stopped opening new RRBs in 1987 – by that time their total number stood at 196.

• Due to excessive lending towards social banking and catering to the highly economically weaker sections, these banks started incurring huge losses by early 1980s; and 171 RRBs are running in losses.

• The Government set up Bhandari Committee and Basu Committee for the restructuring and strengthening of these banks.

• The Committee on Financial Structuring has recommended merging of the loss making RRBs with their sponsor nationalized banks. At present there are 40 RRBs functioning in India even though the amalgamation and recapitalization processes are going on.

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