Rural banking in India came into existence since the establishment of banking sector in India. Rural Banks in those days mainly focused upon the agro sector. Banking Regulation Act, 1949 brought cooperative Banks and Regional Rural Banks under the Reserve Bank’s jurisdiction, while amendments to the Reserve Bank of India Act, Regional Rural Banks (RRB) are regulated by the Rural Planning and Credit Department of Government of India and supervised by NABARD. Capital share being 50% by the Central Government, 15% by the state government and 35% by the scheduled bank. Total authorized capital was fixed at Rs.1 Crore which has since been raised to Rs 5 crore. RRBs started their development process on 2nd October, 1975 with the formation of a single bank (Prathama Grameen Bank)
Functions of RRBs are as follows
- RRBs grant loans and advances to small farmers and agricultural laborers so that they can start their own farming activities including purchase of land, seeds and manure.
- RRBs provides banking services at the doorsteps of the rural people ,particularly in those area which are not served by any commercial Bank
- The RRBs charges a lower rate of Interest and thus they reduce the cost of credit in the rural areas.
- RRBs provide loan and other financial assistance to entrepreneurs in villages, sub-urban areas and small towns .So that they become able to enlarge their business.
- Loans to artisans to encourage them for the production of artistic and related goods.
- Encourage the saving habit among the rural and semi-urban population.
RRBs: as on March 31, 2010
Total number of RRBs: 82
Number of Branches: 15475
Deposits: Rs145035 crore
Loans Outstanding: Rs 79157 crore
Number of Loss-making Banks: 3
Number of profit making banks: 79
Operating Profits: Rs 2913 crore
Net Profit: Rs 1884 crore
Districts Covered: 619
Source: Report on Trend and progress of banking in India,2009-10