Regional Rural Banks (RRB’s) and its challenges in India

Regional Rural Banks (RRB): are financial intermediates to serve rural and unbanked people of India. All rural regional banks are subsidiaries of national scheduled banks aimed to spread their services more in rural parts of India. The government of India introducing Regional Rural Banks Act in 1976, in which Government of India will provide 50% of share capital and state government and regional banks will share 15% and 35 % respectively.

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Features of Regional Rural Banks:

1. Granting loans and advances to small farmers to support their farming activates such as buying of seeds fertilizers and hiring agriculture labor.
2. Providing Loans at lower Interest rates and large repayment period
3. Offering loans to small vendors and artists to encourage and expand their business.
4. Accepting deposits and fixed deposits from farmers to encourage savings.
5. Generating employment opportunities in rural parts of India by Empowering Women and Youth.

Challenges of RRB’s

1. Improper Planning: The coordination between central banks and regional banks are not up to the mark. Regional banks are still planning to establish their branches in delta areas where is it required more.
2. Poor Recovery Rate: Recovery policies of the central/state banks and changing governments are making it too difficult for regional banks for recovery. Farmers are also having a lot of troubles with unsatisfactory results with their farms.
3. Lack of Training: Bank employees are majorly focusing on urban locations, and they need to provide training to help and accommodate the rural population in a better way.
4. Slow Progress Rate: The peace of loan from RRBS are considerable slow when compared to commercial banks. Majority of customers are uneducated they need to be treated with special efforts from bank staff. Interest rates and slightly higher when compared to commercial banks.
5. Running in Losses: There were closely 200 Regional rural banks in 1990 and reduced to approximately 130 covering 525 districts in India. There were numerous acquisitions and mergers to expand their business.

The report on ‘Trend and Progress of Banking in India 2006-07’, which was released by Reserve Bank of India on Tuesday, says that net profits of RRBs declined to Rs. 596 crore during 2006-07 as against Rs.617 crore during 2005-06.
The structural consolidation among RRBs — which was effected by the Government on September 12, 2005 — has brought down the number of both profit and loss-making RRBs during 2006-07. The number of profit-making and loss-making RRBs declined to 81 (111) and 15 (22), respectively. This trend was attributed to the amalgamation process of RRBs that began in 2005. The number of total RRBs stood at 96 (133) during 2006-07. Declining RRB’s

List of RRB’s in India

1. Andhra Pradesh Grameena Vikas Bank
2. Deccan Grameen Bank
3. Chaitanya Godavari Grameen Bank
4. Saptagiri Grameen Bank
5. Panjab Gramin Bank
6. Karnataka Vikas Grameen Bank
7. Visveshvaraya Gramin Bank
8. Mizoram Rural Bank
9. Prathama Bank
10. Bangiya Gramin Vikas Bank