Regional Rural Banks are local banking organizations operating in different states of India. They have been created in order to serve mainly rural areas of India with basic banking and financial services. However, RRBs may have established branches for urban operations and their area of operation may also include urban areas.
The area of operation of the RRBs is limited to the area notified by the Government of India which covers one or more districts of the State. RRBs also perform a variety of different functions. RRBs perform several functions in the following areas: • Provide banking services to rural and semi-urban areas. Execution of governmental operations such as the disbursement of salaries of the workers of MGNREGA, distribution of pensions, etc. • Provision of para-banking facilities such as locker, debit and credit card facilities.
The nationalization of banks in 1969 boosted public confidence in the country's banking system. However, in the early 1970s, there was a feeling that, even after nationalization, there were cultural problems that made it difficult for commercial banks, even under government ownership, to lend to farmers. This issue was taken up by the government and established the Narasimham Working Group in 1975. On the basis of the recommendations of this committee, a Regional Rural Banking Ordinance was promulgated in September 1975, which was replaced by the Rural Banking Act 1976.
History
Regional Rural Banks were established in accordance with the provisions of an Ordinance approved in September 1975 and the RRB Act. 1976 to provide sufficient banking and credit facilities for agriculture and other rural sectors. These were established on the recommendations of The M. Narasimham. Working during the tenure of the Indira Gandhi government in order to include rural areas in the mainstream economy since then, about 70% of the Indian population was rural-oriented. The process of development of the RRB began on October 2, 1975 with the constitution of the first RRB, the Prathama Bank with authorized capital of Rs. 5 crores in its beginning. Also on October 2, 1976, five regional rural banks with a total authorized capital of Rs. 100 crore ($ 10 million), which then increased to 500 crore ($ 50 million). The Rural Regional Bank was owned by the Central Government, the State Government and the Sponsoring Bank (there were five commercial banks, Punjab National Bank, State Bank of India, Syndicated Bank, United Bank of India and United Commercial Bank, Rural banks) holding shares in the following percentages: Central Government -50%, State Government- 15% and Bank Sponsor-Previously, the Reserve Bank of India had set ceilings on the interest rate Should collect these RRBs.
