Regional Rural Banks / history of functions of RRB in India
The Regional Rural Banks (RRBs) provide credit and other facilities to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in rural areas.
The RRB Act, 1986, empowers the Central Government to establish in a State or Union Territory one or more RRBs. The authorised capital of an RRB is fixed at 1 crore and its issued capital at 2 lakhs. Of the issued capital, 50 per cent is to be subscribed by the Central Government, 15 per cent by the concerned State Government and the rest 35 per cent by the sponsoring bank. The working and affairs of the RRB are directed and managed by a Board of Directors consisting of a Chairman, three directors to be nominated by the Central Government, and not more than two directors to be nominated by the State Government concerned, and not more than 3 directors to be nominated by the sponsoring bank. The chairman is appointed by the Central Government and his term of office does not exceed five years.
Difference between RRB and Commercial Banks
1. The main reason behind the existence of RRB is the development of rural and backward areas, and also providing banking facility to rural population whereas the main reason behind the existence of commercial banks is to make profits out of their operations.
2. Scope of RRB is limited to agriculture finance, small sector loans, handicrafts and other small sector loans, whereas scope of commercial banks is wide and it not only provides agriculture finance but also housing loan, car finance, letter of credit and loans to big companies for many activities.
3. RRB is present in rural and semi urban areas only whereas commercial banks do operations in all over the country that is rural, semi urban and urban areas.
4. While the focus of RRB is more on accepting deposits and granting of loans to the people whereas the focus of commercial banks apart from lending and borrowing is on many other services like stock broking, asset management, insurance, merchant banking, venture capital financing, foreign exchange related business etc.
5. Stakeholders of RRB include government of India, state government and commercial banks whereas stakeholders of commercial banks are public, central govemment etc.
Functions of RRBs
Functions of RRBS are as follows:
1. RRBS grant loans and advances to small farmers and agricultural labourers so that they can start their own farming activities including purchase of land, seeds and manure.
2. RRBs provides banking services at the doorsteps of the rural people, particularly in those area which are not served by any commercial Bank.
3. The RRBs charge a lower rate of interest and thus they reduce the cost of credit in the rural areas.
4. RRBs provide loan and other financial assistance to entrepreneurs in villages, sub-urban areas and small towns. So that they are able to expand their business.
5. Loans to artisans to encourage them for the production of artistic and related goods.
6. Encourage the saving habit among the rural and semi-urban population.
Progress of RRB: Ever since their inception, RRB are growing at a phenomenal rate. Presently there are more than 100 RRBS operational in the country with more than 16,000 branches. Their cumulative deposits gross over 150,000 crores with more than 100,000 crores of outstanding loans. These banks provide financial assistance in more than 700 districts of the country. Their cumulative operating profit is more than Rs. 3000 crores and net profit more than 2000 crores.
