Regional Rural Banks (RRBs)

Regional Rural Banks (RRBs) Latest News

The Finance Ministry recently unveiled a new logo for Regional Rural Banks (RRBs) to signify a single and unified brand identity.

About Regional Rural Banks (RRBs)

• RRBs were established in India to promote financial inclusion in rural areas. 
• They are formed in collaboration by the Central Government, State Governments, and Sponsoring Commercial Banks to give loans to rural areas.
• Their mission is to fulfill the credit needs of the relatively unserved sections in rural areas: small and marginal farmers, agricultural labourers, and socio-economically weaker sections.
• Origin:
  • It was established under the Regional Rural Banks Act, 1976, on the recommendation of the Narasimham Committee on Rural Credit (1975). 
  • Rathama Grameen Bank was the first RRB bank and was established on 2nd October 1975.
• RRBs were configured as hybrid microbanking institutions, combining the local orientation and small-scale lending culture of the cooperatives with the business culture of commercial banks.
• The RRBs mobilize financial resources from rural/semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers, artisans, and small entrepreneurs. 
• RRBs perform various functions in the following heads:
  • Providing banking facilities to rural and semi-urban areas.
  • Carrying out government operations like the disbursement of wages of MGNREGA workers, distribution of pension, etc.
  • Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, UPI, etc.
• The RBI has set a Priority Sector Lending (PSL) target of 75% of total outstanding advances for RRBs as against 40% for Scheduled Commercial Banks. 
• Ownership: Sponsored by the Commercial Banks, the equity of RRBs is held by the central government, concerned state government, and the sponsor bank in the proportion of 50:15:35. 
• The area of operation of RRBs is limited to the area as notified by the Government of India, covering one or more districts in the State. 
• Regulation: Regional Rural Banks are regulated by the RBI and supervised by the National Bank for Agriculture and Rural Development (NABARD).
• Sources of Funds: It comprises owned funds, deposits, borrowings from NABARD, sponsor banks and other sources, including SIDBI and the National Housing Bank.
• Management: The Board of Directors manages these banks, overall affairs, which consists of one Chairman, three Directors as nominated by the Central Government, a maximum of two Directors as nominated by the concerned State Government, and a maximum of three Directors as nominated by the sponsor bank.
• At present, 28 RRBs operate across the country with a vast network of over 22 thousand branches in more than 700 districts.

Source: TH

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