Objective of setting up RRBs:
With the bank nationalisation in 1969 not giving the desired results in expanding rural base of banks, the Government came out with a new credit agency to operate in rural areas in the form of RRBs in 1975.
1'st phase of amalgamation
Current performance details of RRBs:
Large segment of credit provided by RRBs goes towards agriculture (about 54 per cent in 2010) as direct finance. About 16 per cent of the total RRB credit goes towards loans for personal purposes, like housing, consumer durables, vehicles, education and so on, while nine per cent is used for wholesale- and retail-trade activities. Overall, although agricultural credit of RRBs has been on the rise since 2006, it contributes only 11 per cent to the total agricultural credit disbursed by Scheduled Commercial Banks.
G Srinivasan Committee on Technology upgradation, Sep 2011:
The report, inter alia, set September 2011 as the target date for all RRBs to move towards CBS. It was also stipulated that all branches of RRBs opened after September 2009 to be CBS compliant from day one.
K.C. Chakrabarty Committee on Recapitalisation of RRBs Aug 2012
With the bank nationalisation in 1969 not giving the desired results in expanding rural base of banks, the Government came out with a new credit agency to operate in rural areas in the form of RRBs in 1975.
Regional Rural
Banks (RRBs) were established in 1975 under
the provisions of the Ordinance promulgated on the 26th September 1975 and
followed by Regional Rural Banks Act, 1976 with a view to develop the rural
economy and to create a supplementary channel to the 'Cooperative Credit
Structure' with a view to enlarge institutional credit for the rural and
agriculture sector.
The Government of India, the concerned State
Government and the bank, which had sponsored the RRB contributed to the share
capital of RRBs in the proportion of 50%, 15% and 35%, respectively. 1'st phase of amalgamation
Even as the number of RRBs grew to
196 in the initial 12 years, the government began a process of consolidation
and amalgamation in 2005, bringing the number down to 82 in 2010.
2'nd phase of amalgamation
Starting 2012 amalgamation started to create state level RRBs. Up to January 7, 2012, 25 RRBs have been amalgamated into 10 RRBs in
seven states. As a result, the number of
RRBs has reduced from 82 as on April 2012 to 67 in the first week of January 2013.
Current performance details of RRBs:
RRBs have a
network of about 16,000 branches spread across the rural and semi-urban centres
of the country.
As part of growing amalgamation, number of RRBs has
reduced from 82 as on April 2012 to 67 in the first week of January, 2013.Large segment of credit provided by RRBs goes towards agriculture (about 54 per cent in 2010) as direct finance. About 16 per cent of the total RRB credit goes towards loans for personal purposes, like housing, consumer durables, vehicles, education and so on, while nine per cent is used for wholesale- and retail-trade activities. Overall, although agricultural credit of RRBs has been on the rise since 2006, it contributes only 11 per cent to the total agricultural credit disbursed by Scheduled Commercial Banks.
G Srinivasan Committee on Technology upgradation, Sep 2011:
The report, inter alia, set September 2011 as the target date for all RRBs to move towards CBS. It was also stipulated that all branches of RRBs opened after September 2009 to be CBS compliant from day one.
K.C. Chakrabarty Committee on Recapitalisation of RRBs Aug 2012
·
The
Committee carried out an assessment of capital requirement for all 82 RRBs to
enable them to have CRAR of at least 7% as on March 31, 2011 and at least 9%
from March 31, 2012 onward. The
recapitalisation requirement would be Rs. 2200 crore for 40 out of 82 RRBs.
This amount may be released in two installments i.e., Rs. 1338 crore in 2010-11
and Rs. 863 crore 2011-12. The remaining
42 RRBs will not acquire any capital and will be able to maintain CRR of at
least 9% as on March 31, 2012 and thereafter on their own.
Additional Rs 700 crore recapitalisation for RRBs of North East region, if required
Allowing change of sponsor bank
Making board of directors accountable for performance of banks
Problems:
1. Capitalisation deficit
2. CBS is costly, needs training of staff, power etc.
3. Amalgamation not yet complete
4. Low share in deposits and credit as compared to Scheduled commercial banks despite good geographical spread
5. low penetration in insurance etc i.e. non-savings portfolio
Functions
ReplyDeleteEvery RRB is authorized to carry on to transact the business of banking as defined in the Banking Regulation Act and may also engage in other business specified in Section 6 (1) of the said Act. In particular‚ a RRB is required to undertake the business of
(a) granting loans and advances to small and marginal farmers and agricultural laborers‚ whether individually or in groups, and to cooperative societies‚ including agricultural marketing societies‚ agricultural processing societies‚ cooperative farming societies‚ primary agricultural credit societies or farmers’ service societies‚ primary agricultural purposes or agricultural operations or other related purposes, and
(b) granting loans and advances to artisans‚ small entrepreneurs and persons of small means engaged in trade‚ commerce‚ industry or other productive activities‚ within its area of operation.
The Reserve Bank of India has brought RRB’s under the ambit of priority sector lending on par with the commercial banks. They have to ensure that forty percent of their advances are accounted for the priority sector. Within the 40% priority target, 25% should go to weaker section or 10% of their total advances to go to weaker section.