THE REGIONAL RURAL BANKS
The Regional Rural Banks are relatively new banking institutions i which were added to the Indian banking scene since October. 1975. There are 196 Regional Rural Banks with a network of branches in the States of the Indian Union. These banks have been established by the Government of India in terms of the provisions of the Regional Rural Banks Act. 1976.
The distinctive feature of a rural bank is that though it is a separate body corporate with perpetual succes¬sion and common seal. it is very closely linked with the commercial bank which has sponsored the pro¬posal to establish it. The Central Government while -&Stablishing a rural bank at the request of the com¬. mercial bank specifies the local limits within which it shall operate. The rural bank Jllay establish its branches or agencies at any place within the notified area.
The necessity of rural banks was felt because the then existing credit agencies-the co-operative banks and the commercial banks-- lacked in certain respects in meeting the needs of the rural areas. The weak¬nesses of these institutions in this regard may be summed up as follows :
(i) The co-operative credit structure is weak so far as the. managerial talent and post-credit supervision and loan recovery are concerned. These institutions have not been able to mobilise adequate resources and therefore depend upon the Reserve Bank for re-finance to a large extent.
(ii) The commercial banks are basically urban-oriented. If they have to playa significant role in rural banking. their methods. procedures. training and ori¬entation shall have to be adapted to the rural environment. This is not likely to be achieved easily and quickiy. Moreover. the cost of their operations is quite high due to high salary structure. staffing pattern and high establishment cost. Thus the commercial banks are unable to provide credit at cheap rates to the weaker sections in the rural areas.
The need was. therefore. felt for a new institution which should combine the merits of these two instiutions without suffering from their drawbacks. A Rural Bank has been contemplated as an institution to "combine the rural touch and local feel. a familiarity with rural problems and attitudinal identification with the rural economy which the co-operatives possess in large degree. with the modern business organisation. commercial discipline. ability to mobilise resources and access to the central money markets which the commercial banks have". In other words. the institution of rural banks is intended to be "locally based. rural-oriented and commercially organised."
Capital : Initially the authorised share capital of each Rural Bank was Rs. 1 crore. divided into 1 lakh shares of Rs. 100 each. Fifty per cent of the issued capital was subscribed to by the Central Government. fifteen per cent by the concerned State Governments and thirty-five per cent by the sponsor bank. With the enactment of the Regional Rural Banks (Amendment) Act. 1987. the authorised capital of each RRB has been raised to Rs. 5 crores and paid-up capital to Rs. 1 crore. The Board of Directors of a Rural Bank may. after consultation with the Reserve Bank and the. sponsoring bank and with the prior approval of the Central Government. increase the issued capital from time to time. The additional capital shall be sub¬scribed in the same proportion as is specified above (Section 6). The shares of the Rural Banks shall be deemed to be included in the' securities enumerated in Section 20 of the Indian Trusts Act. 1882 and shall also be deemed to be approved securities for the pur¬poses ofthe Banking Regulation Act. 1949 .
Business of a Rural Bank : A Rural Bank carries on the normal banking business. i.e ..t he business of banking as defined in Section 5 (b) of the Banking Regulation Act. 1949 and engages in one or more forms of business specified in Section 6( 1) of that Act. A Rural Bank may. in particular. undertake the
following types of business. namely: .
(a) the grafting of loans and advances. particularly to small and marginal farmers and agricultural labourers. whether individual or in groups and to co-operative societies (including agricultural marketing societies, agricultural processing societies, co-operative farming societies, primary agricultural credit so¬cieties or farmers' service societies) for agricultural purposes or agricultural operations or for other con-nected purposes; and
(b) the granting of loans and advances, particularly to artisans, small entrepreneurs and persons of small means engaged in trade, commerce or industry or other productive activities within the notified area, of a Rural Bank.
Regional Rural Banks are thus primarily meant to cater to the needs of the poor and small borrowers in the countryside. At the end of December 1987, their advances to the weaker sections accounted for 92% of their total direct advances. A sizable portion of in¬direct advances was also provided to the weaker sections.
Management : Each Rural Bank is managed by a Board of Directors. The general superintendence, direction and management of the affair.s and business vest in the Board. In discharging its functions, the Board of Directors act on business principles; and shall have due regard to public interest. A Regional Bank is guided by the directions issued by the Central Government in regard to matters of policy involving public interest.
The cost of operations of Rural Banks has been kept in strict control. The Central Government prescribes the salary scales of the employees after keeping in view the salary structure of the employees of the State Governments and the local authorities of comparable level and status in the notified area.
Responsibilities of Sponsor Banks : The RRB (Amendment) Act, 1987 has greatly enhanced the re¬sponsibilities of the sponsor banks in respect of the functioning of the RRBs. Apart from subscribing to the share capital, the sponsor banks shall assist the RRBs by imparting training to the personnel and pro¬viding managerial and financial assistance to the RRBs during the first 5 years of their functioning. The sponsor banks are empowered to monitor the progress of RRBs, to conduct inspections, internal audit and security and to suggest corrective measures, as and when necessary.
The' Regional Rural Banks avail of the refinance facilities from the National Bank for Agriculture and Rural Development- in respect of the short-term, me¬dium and long-term advances granted by them. The sponsor banks also provide them refinance. The de-posits with these banks are insured by the Deposit Insurance and Credit Guarantee Corporation.
DIFFERENT RRBS IN INDIA
Rural banking in India started since the establishment of banking sector in India. Rural Banks in, those days mainly focussed upon the agro sector. Re¬gional rural banks in India penetrated every comer of the country and extended a helping hand in the growth process of the country. SBI has 30 Regional Rural Banks in India known as RRBs. The rural banks of SBI Rural spread in 13 states extending from Kashmir to Karnataka and Himachal Pradesh to North East. The total number of SBIs Regional Rural Banks in India branches is 2349 (16%). Till March, 2007 in rural banking in India, there are 14,475 rural banks in the country of which 2126 are located in remote rural areas.
Apart from SBI, there are other few banks which functions for the development of the rural areas in India. Few of them are as follows.
HARYANA STATE COOPERATIVE APEX BANK LIMITED
The Haryana State Cooperative Apex Bank Ltd. commonly called as HARCOBANK plays a vital role in rural banking in the economy of Haryana State and has been providing aids iIDd financing farmers, rural artisans, agricultural labourers, entrepreneurs etc. in the state and giving service to its depositors. NABARD
National Bank for Agriculture and Rural Development (NABARD) is a development bank in the sector of Regional Rural Banks in India. It provides and regulates credit and gives service for the promotion and development of rural sectors mainly agriculture, small scale industries, cottage and village industries, handicrafts. It also finance rural crafts and other al¬lied rural economic activities to promote integrated rural development. It helps in securing rural prosperity and its connected matters .
SINDHANUR URBAN SOUHARDA CO-OPERATIVE BANK
Slndhanur Urban Souharda Co-operative Bank, popularly known as SUCO BANK is the first of its kind in rural banks of India. The impressive story of its inception is interesting and inspiring for all the youth of this country.
UNITED BANK OF INDIA
United Bank of India (UBI) also plays an important role in regional rural banks. It has expanded its branch network in a big way to actively participate in the development of the rural and semi-urban areas in conformity with the objectives of nationalisation.
SYNDICATE BANK
Syndicate Bank was firmly rooted in rural India as rural banking and have a clear vision of future India by understanding the grassroot realities. Its progress has been abreast of the phase of progressive banking in India especially in rural banks.
LAND DEVELOPMENT BANKS
The long-term credit needs of the agricultural sec¬tor are met by another type of co-operative institutions known as Land Development Banks. The structure of these banks is a two-tier one-at the State level. there are Central Land Development Banks and at the district or taluka level. there are Primary Land Development Banks. In a few States, e.g., Gujarat, Jammu & Kashmir and U.P., the structure is unitary,i.e .. there are Apex Land Development Banks which operate direct through their own branches at the district level.
The Land Development Banks meet the require¬ments of the fanners for developmental purposes. viz., provision of equipment like pump-sets, tractors and machinery and land improvement in the form of lev¬elling. funding. reclamation of land, fencing. sinking of new wells and repairs to old wells. Loans are granted on the security of mortgage of is immovable property of the fanners.
The Central Land Development Banks raise their resources by floating debentures in the market. These debentures carry the guarantee of the State Govemment and are subscribed by the Central and State Govemments. Commercial Banks. Life Insurance Corporation and other Land Development Banks as a measure of mutual support. The Land Development Banks have availed of the refinancing facilities provided by the National Bank for Agriculture and Rural Development in respect of the term loans granted by them for the schemes of-agricultural development. They also secure short-term accommodation from the State Governments. Commercial Banks and the State Co-operative Banks.
The Land Development Banks meet the require¬ments of the fanners for developmental purposes. viz., provision of equipment like pump-sets, tractors and machinery and land improvement in the form of lev¬elling. funding. reclamation of land, fencing. sinking of new wells and repairs to old wells. Loans are granted on the security of mortgage of is immovable property of the fanners.
The Central Land Development Banks raise their resources by floating debentures in the market. These debentures carry the guarantee of the State Govemment and are subscribed by the Central and State Govemments. Commercial Banks. Life Insurance Corporation and other Land Development Banks as a measure of mutual support. The Land Development Banks have availed of the refinancing facilities provided by the National Bank for Agriculture and Rural Development in respect of the term loans granted by them for the schemes of-agricultural development. They also secure short-term accommodation from the State Governments. Commercial Banks and the State Co-operative Banks.
