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.

Regional Rural Banks in India, Objectives, Functions

Q: 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).

Q: 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.

Table of Contents

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.

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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.

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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.

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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.

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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
Assam	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
Jammu and Kashmir	J&K Grameen Bank	J&K Bank Ltd.	Jammu
Jharkhand	Vananchal Gramin Bank	State Bank of India	Ranchi
Jharkhand	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	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
Odisha	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	Rajasthan Marudhara Gramin Bank	State Bank of India	Jodhpur
Tamil Nadu	Pallavan Grama Bank	Indian Bank	Salem
Tamil Nadu	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.

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