Present scenario of regional rural banks in India

Abstract

Regional rural banks (RRBs) play an important role in the rural development of the country. They have created a huge banking network in rural areas. At present, most of the RRBs are facing the problems of long overdue, nonrecovery of loans and other problems. RRBs were established to mobilise savings from rural areas and to provide loans to small and marginal farmers rural artisans, agricultural labours and other backward classes of rural people. They also provide other banking services to the rural people. The RRBs also play an important role in the implementation of Central and state government sponsored programmes of poverty alleviation. Special facilities have been granted to RRBs by the RBI and NABARD do that they can manage competition from stronger banks like commercial banks. Several committees have been formed from time to time to provide recommendations for improving the financial performance of RRBs. In 2007 the GOI took a decision of amalgamation of RRBs. The process of amalgamation started in September 2005 and continued upto march 2008. In the process 145 out of 196 RRBs were amalgamated to form new 45 RRBs by March, 2007. In view of the importance of RRBs in the rural economy our objective in this paper is to examine why the RRBs lost their focus and to consider the problems and challenges faced by the RRBs in their functioning. The paper also gives a set of recommendations for improving the functioning of RRBs. The present status and future plans for RRBs are also considered in this context.