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Regional Rural Banks in India, Objectives, Functions, Achievements

Regional Rural Banks

Regional Rural Banks (RRBs) are financial institutions in India that are designed to provide banking services in rural areas. They were established under the Regional Rural Banks Act of 1976, with the aim of bringing banking services closer to rural and agricultural communities and promoting rural development.

RRBs are structured as scheduled commercial banks and are regulated by the Reserve Bank of India (RBI). They operate in a specific region, generally consisting of districts within a state. Each RRB is sponsored by a commercial bank, which provides necessary support and assistance.

RRBs are jointly owned by the Central Government, the State Government, and the sponsoring commercial bank in a specific ratio. The central government holds a 50% stake, the state government holds a 15% stake, and the sponsoring commercial bank holds a 35% stake.

Read about: Banking System in India

Regional Rural Banks Functions

The functions of Regional Rural Banks (RRBs) can be summarized as follows:

Regional Rural Banks Functions
Function Details
Banking Services RRBs provide banking services like savings accounts, current accounts, deposits, and basic transactions to rural areas.
Credit Facilities RRBs offer loans to farmers, agricultural laborers, artisans, and small entrepreneurs for agriculture, livestock, machinery, housing, and small businesses.
Agricultural and Rural Development RRBs support agricultural activities, rural infrastructure development, and small-scale industries for overall rural growth.
Financial Inclusion RRBs promote financial inclusion by opening bank accounts, encouraging savings, and providing institutional credit to unbanked and underbanked rural areas.
Cooperative Banking Activities RRBs work with agricultural cooperatives and self-help groups to provide financial support and foster cooperation among rural communities.
Priority Sector Lending RRBs prioritize lending to sectors like agriculture, micro and small enterprises, and weaker sections of society as mandated by the RBI. The mandatory target for priority sector lending by RRBs is currently set at 75%.

Read about: Public Sector Banks

Regional Rural Banks Achievements

RRBs have played a crucial role in providing credit to the agricultural sector, which is vital for rural development. As of March 2021, RRBs had a total agricultural credit outstanding of over Rs. 2.4 lakh crore (approximately USD 32.7 billion).

Also, RRBs have supported rural entrepreneurship and small businesses, contributing to employment generation in rural areas. According to the National Bank for Agriculture and Rural Development (NABARD), RRBs have created over 4 million jobs through their credit and support to small-scale industries.

RRBs impact can also be gauged from the role they have played in promoting financial inclusion in rural areas. They have opened a significant number of accounts for previously unbanked individuals. According to the NABARD, RRBs have opened over 140 million accounts as of March 2021, providing banking services to previously underserved rural populations.

Read about: List of RBI Governors of India

Challenges Faced by Regional Rural Banks 

The challenges faced by RRBs can be summed as follows:

Financial Viability

Maintaining financial viability is a challenge for RRBs due to factors such as low-profit margins, high operating costs, and loan recovery issues in rural areas.

Asset Quality

RRBs often face challenges in managing asset quality, especially in the agricultural sector where loan defaults can occur due to factors like crop failure, natural disasters, or price fluctuations.

Capital Constraints

RRBs may face capital constraints, limiting their ability to meet the increasing credit demand in rural areas and comply with regulatory requirements.

Technological Advancements

Adopting and integrating new technologies pose a challenge for RRBs, particularly in remote rural areas where infrastructure and connectivity are limited.

Human Resource Development

RRBs face challenges in attracting and retaining skilled personnel in rural areas, which can impact their ability to deliver efficient banking services and implement effective risk management practices.

Governance and Management

Effective governance and management practices are essential for the smooth functioning of RRBs. However, challenges related to governance, leadership, and internal controls may arise, impacting operational efficiency and transparency.

Read about: Types of Banks in India

Regional Rural Banks Reforms Needed 

Several committees have been constituted to recommend reforms for Regional Rural Banks (RRBs). Here are recommendations of some notable committees:

Vyas Committee (2004)

  • Recommended the conversion of RRBs into full-fledged commercial banks to enhance their financial strength and operational efficiency.
  • Suggested raising the capital adequacy ratio to 9% to ensure the financial stability of RRBs.
  • Advocated for the strengthening of governance and management practices in RRBs.

Chore Committee (2015)

  • Recommended measures to improve the financial viability of RRBs, including capital infusion by the government and sponsorship by strong commercial banks.
  • Emphasized the need for performance-based incentives and a robust business strategy for RRBs.
  • Suggested the adoption of technology-driven banking practices and enhanced risk management frameworks.

Nayak Committee (2018)

  • Recommended a comprehensive reform package for RRBs, including the recapitalization of financially weak RRBs.
  • Suggested consolidation of RRBs to create stronger and more sustainable entities.
  • Emphasized the importance of enhancing digital banking capabilities and financial inclusion efforts.

Sudarshan Sen Committee (2019)

  • Recommended a roadmap for the transformation of RRBs into “Universal Banks for Rural India.”
  • Advocated for the strengthening of governance, risk management, and internal controls in RRBs.
  • Suggested the adoption of digital technologies and innovative banking practices to enhance operational efficiency and customer service.

Read about: Indian Financial System

Regional Rural Banks in India

The primary goal of the introduction of RRBs in India was to comfort those residing in rural areas by giving them access to all necessary banking resources and services. The list of regional rural banks in India is broken down by state, along with information about their sponsor banks and corporate headquarters:

List of Regional Rural Banks in India
State Name of RRB Sponsor Bank Head Office
Andhra Pradesh Andhra Pragathi Grameena Bank Syndicate Bank Kadapa
Chaitanya Godavari Grameena Bank Andhra Bank Guntur
Andhra Pradesh Grameena Vikas Bank State Bank of India Kadapa
Saptagiri Grameena Bank Indian Bank Chittor
Arunachal Pradesh Arunachal Pradesh Rural Bank State Bank of India Naharlagun
Assam Assam Gramin Vikash Bank United Bank of India Guwahati
Langpi Dehangi Rural Bank State Bank of India Diphu
Bihar Uttar Bihar Gramin Bank Central Bank of India Muzaffarpur
Bihar Gramin Bank UCO Bank Patna
Madhya Bihar Gramin Bank Punjab National Bank Patna
Chhattisgarh Chhattisgarh Rajya Gramin Bank State Bank of India Raipur
Gujarat Baroda Gujarat Gramin Bank Bank of Baroda Bharuch
Dena Gujarat Gramin Bank Dena Bank Gandhinagar
Saurashtra Gramin Bank State Bank of India Rajkot
Haryana Sarva Haryana Gramin Bank Punjab National Bank Rohtak
Himachal Pradesh Himachal Pradesh Gramin Bank Punjab National Bank Mandi
Jammu and Kashmir Ellaquai Dehati Bank State Bank of India Srinagar
J&K Grameen Bank J&K Bank Ltd. Jammu
Jharkhand Vananchal Gramin Bank State Bank of India Ranchi
Jharkhand Gramin Bank Bank of India Ranchi
Karnataka Pragathi Krishna Gramin Bank Canara Bank Ballari
Kaveri Gramin Bank State Bank of India Mysuru
Karnataka Vikas Grameena Bank Syndicate Bank Dharwad
Kerala Kerala Gramin Bank Canara Bank Mallapuram
Madhya Pradesh Narmada Jhabua Gramin Bank Bank of India Indore
Central Madhya Pradesh Gramin Bank Central Bank of India Indore
Madhyanchal Gramin Bank State Bank of India Sagar
Maharashtra Vidarbha Konkan Gramin Bank Bank of India Nagpur
Maharashtra Gramin Bank Bank of Maharashtra Aurangabad
Manipur Manipur Rural Bank United Bank of India Imphal
Meghalaya Meghalaya Rural Bank State Bank of India Shillong
Mizoram Mizoram Rural Bank State Bank of India Aizawl
Nagaland Nagaland Rural Bank State Bank of India Kohima
Odisha Odisha Gramya Bank Indian Overseas Bank Bhubaneshwar
Utkal Grameen Bank State Bank of India Bolangir
Puducherry Puduvai Bharathiar Grama Bank Indian Bank Puducherry
Punjab Punjab Gramin Bank Punjab National Bank Kapurthala
Malwa Gramin Bank State Bank of India Sangrur
Sutlej Gramin Bank Bhatinda
Rajasthan Baroda Rajasthan Kshetriya Gramin Bank Bank of Baroda Ajmer
Rajasthan Marudhara Gramin Bank State Bank of India Jodhpur
Tamil Nadu Pallavan Grama Bank Indian Bank Salem
Pandyan Grama Bank Indian Overseas Bank Virudhunagar
Telangana Telangana Grameena Bank State Bank of India Hyderabad
Tripura Tripura Gramin Bank United Bank of India Agartala
Uttar Pradesh Gramin Bank of Aryavart Bank of India Lucknow
Allahabad UP Gramin Bank Allahabad Bank Banda
Baroda Uttar Pradesh Gramin Bank Bank of Baroda Raebareli
Kashi Gomti Samyut Gramin Bank Union Bank of India Varanasi
Sarva UP Gramin Bank Punjab National Bank Meerut
Prathama UP Gramin Bank Syndicate Bank Moradabad
Purvanchal Bank State Bank of India Gorakhpur
Uttarakhand Uttarakhand Gramin Bank State Bank of India Dehradun
West Bengal Bangiya Gramin Vikash Bank United Bank of India Murshidabad
Paschim Banga Gramin Bank UCO Bank Howrah
Uttarbanga Kshetriya Gramin Bank Central Bank of India Coochbehar

Candidates who wish to submit an online application for the forthcoming IBPS RRB recruitment can do so using the list of regional rural banks that is provided above. The state from which a candidate wishes to apply for the exam is a choice.

Difference between RRBs & Commercial Banks

Major distinctions between regional rural banks and commercial banks are mentioned below in terms of their goals, areas of focus, stakeholder participation, etc.

Difference between RRBs & Commercial Banks
RRB Points of Difference Commercial Banks
Development of individuals in the rural and backward areas by way of providing credit and banking facilities. Purpose Earn profits out of deposits, loan extending, and other activities.
Limited to agriculture finance, small sector loans, craftsmen, artisans, and other small sectors. Scope They not only provide agriculture finance but also offer loans for housing, vehicles, letters of credit, etc.
Present in rural and semi-urban areas only Area of operation Present all over the country including rural, semi-urban, and urban.
Accepting deposits and granting loans to needy individuals in rural and semi-urban areas. Focus Apart from lending and borrowing, these banks also carry out stock broking, merchant banking, venture capital financing, asset management, etc.
Stakeholders include the government of India, the state government, and commercial banks as sponsors. Stakeholding Stakeholders are the public, central government, etc.

Regional Rural Banks UPSC 

To prepare for topics like RRBs, one can focus on the Economy section of the UPSC Syllabus, utilize UPSC Online Coaching for comprehensive courses, and take UPSC Mock Test for exam practice. It is important to study RRBs’ functions, challenges, achievements, and reforms within the context of the Indian Economy. Also, is it important that one stays updated with current affairs and integrate RRBs with related topics like rural credit and financial inclusion. This approach will provide a well-rounded understanding and enhance exam readiness.

Read about: Finance Ministers of India List

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Regional Rural Banks FAQs

What is regional rural bank?

Regional Rural Bank is a type of financial institution that provides banking and financial services in rural areas of India.

What are Regional Rural Banks examples?

Examples of Regional Rural Banks in India include Punjab Gramin Bank, Baroda Rajasthan Kshetriya Gramin Bank, and Kerala Gramin Bank.

What are the functions of RRBs?

The functions of RRBs include providing agricultural and rural credit, promoting rural savings, facilitating financial inclusion, and supporting rural development activities.

Who regulates RRBs in India?

Regional Rural Banks in India are regulated by the National Bank for Agriculture and Rural Development (NABARD) and the Reserve Bank of India (RBI).

What is the capital of RRB?

The capital of RRBs is contributed by the Central Government, the State Government, and the Sponsor Bank in a specific ratio.

About the Author

I, Sakshi Gupta, am a content writer to empower students aiming for UPSC, PSC, and other competitive exams. My objective is to provide clear, concise, and informative content that caters to your exam preparation needs. I strive to make my content not only informative but also engaging, keeping you motivated throughout your journey!