INTRODUCTION

Regional Rural Banks have been in existence for around 32 years in the Indian financial scene.
Inception of Regional Rural Banks may be seen as a unique experiment as well as experience in
improving the efficacy of rural credit delivery mechanism in India. Keeping in view the local
peculiarities, an effort was made to integrate commercial banking within the broad policy
framework towards social banking through joint shareholding of Central Government, the
Concerned State Governments and the Sponsoring Bank. The genesis of the Regional Rural
Banks may be traced for the need for a stronger institutional arrangement for providing rural
credit. The institution of Regional Rural Banks (RRBs) was created to meet the excess demand
for institutional credit in the rural areas, particularly among the economically and socially
marginalized sections. Although the cooperative banks and the commercial banks had reasonable
records in terms of geographical coverage and disbursement of credit, in terms of population
groups the cooperative banks were dominated by the rural rich, while the commercial banks had
a clear urban bias. The Banking Commission (1972) recommended to e stablish an alternative
institution for rural credit and ultimately Government of India established Regional Rural Banks
a separate institution basically for rural credit on the basis of the recommendations of the
Working Group under the Chairmanship of Sh. M. Narashimham. In order to provide access to
low-cost banking facilities to the poor, the Narashimham Working Group (1975) proposed the
establishment of a new set of banks, as institutions which combine the local feel and the
familiarity with rural problems which the cooperatives possess and the degree of business
organization, ability to mobilize deposits, access to central money markets and modernized
outlook which the commercial banks have. Subsequently, the Regional Rural Banks were setup
through the promulgation of RRB Act of 1976. The RRBs Act, 1976 succinctly sums up this
overall vision to sub-serve both the developmental and the redistributive objectives. The RRBs
were established with a view to developing the rural economy by providing, for the purpose of
development of agriculture, trade, commerce, industry and other productive activities in the rural
areas, credit and other facilities, particularly to small and marginal farmers, agricultural laborers,
artisans and small entrepreneurs, and for matters connected therewith and incidental thereto.
Regional Rural Banks were supposed to evolve as specialized rural financial institutions for
developing the rural economy by providing credit to small and marginal farmers, agricultural
laborers, artisans and small entrepreneurs. Their equity is held by the Central Government,
Concerned State Government and the Sponsor Bank in the proportion of 50:15:35 respectively.
The mandates of these rural financial institutions were to:
(a) take banking to the doorsteps of the rural masses, particularly in areas without banking
facilities;
(b) make available cheaper institutional credit to the weaker sections of society, who were to be
the only clients of these banks;
(c) mobilize rural savings and canalize them for supporting productive activities in the rural
areas;
(d) generate employment opportunities in the rural areas and

(e) bring down the cost of providing credit in rural areas

History
1975 and the RRB Act. 1976 to provide sufficient banking and credit facility for agriculture and other
Regional Rural Banks were established under the provisions of an Ordinance passed on September
rural sectors. These were set up on the recommendations of The M. Narasimham Working
Group] during the tenure of Indira Gandhi's government with a view to include rural areas into
economic mainstream since that time about 70% of the Indian Population was of Rural Orientation.
The development process of RRBs started on 2 October 1975 with the forming of the first RRB, the
Prathama Bank with authorised capital of Rs. 5 crore at its starting. Also on 2 October 1976 five
regional rural banks were set up with a total authorised capital Rs. 100 crore ($10 Million) which later
augmented to 500 crore ($50 Million). The Regional Rural Bank were owned by the Central
Government, the State Government and the Sponsor Bank(There were five commercial
banks, Punjab National Bank, State Bank of India, Syndicate Bank, United Bank of Indiaand United
Commercial Bank, which sponsored the regional rural banks) who held shares in the ratios as
follows Central Government-50%, State Government- 15% and Sponsor Banks- 35 [2]%..
Earlier, Reserve Bank of India had laid down ceilings on the rate of interest to be charged by these
RRBs.

Recapitalization of Regional Rural Banks

Subsequent to review of the financial status of RRBs by the Union Finance Minister in August, 2009,
it was felt that a large number of RRBs had a low Capital to Risk weighted Assets Ratio (CRAR). A
committee was therefore constituted in September, 2009 under the Chairmanship of K C
Chakrabarty, Deputy Governor, RBI to analyse the financials of the RRBs and to suggest measures
including re-capitalisation to bring the CRAR of RRBs to at least 9% in a sustainable manner by
2012. The Committee submitted its report in May, 2010. The following points were recommended by
the committee:

RRBs to have CRAR of at least 7% as of 31 March 2011 and at least 9% from 31 March
2012 onwards. recapitalisation requirement of Rs. 2,200.00 crore for 40 of the 82 RRBs. This
amount is to be released in two installments in 2010-11 and 2011-12. .

The remaining 42 RRBs will not require any capital and will be able to maintain CRAR of at
least 9% ifs on 31 st March 2012 and thereafter on their own.

A fund of Rs. 100 crore to be set up for training and capacity building of the RRB staff.

The Government of India recently approved the recapitalization of Regional Rural Banks (RRBs) to
improve their Capital to Risk Weighted Assets Ratio CRAR) in the following manner:

Share of Central Government i.e. Rs.1, 100 crore will be released as per provisions made by
the Department of Expenditure in 2010-11 and 2011-12. However, release of Government of
India share will be contingent on proportionate release of State Government and Sponsor Bank
share.

A capacity building fund with a corpus of Rs.100 crore to be set up by Central Government
with NABARD for training and capacity building of the RRB staff in the institution of NABARD
and other reputed institutions. The functioning of the Fund will be periodically reviewed by the

Central Government. An Action Plan will be prepared by NABARD in this regard and sent to
Government for approval.

Additional amount of Rs. 700 crore as contingency fund to meet the requirement of the weak
RRBs, particularly those in the North Eastern. and Eastern Region, the necessary provision will
be made in the Budget as and when the need arises.

Organizational Structure
The Organizational Structure for RRB's varies from branch to branch and depends upon the nature
and size of business done by the branch. The Head Office of an RRB normally had three to seven
departments.
The following is the decision making hierarchy of officials in a Regional Rural Bank.

Board of Directors

Chairman & Managing Director

General Manager

Chief Manager/Regional Managers

Senior Manager

Manager

Officer / Assist

Amalgamation
Currently, RRB's are going through a process of amalgamation and consolidation. 25 RRBs have
been amalgamated in January 2013 into 10 RRBs. This counts 67 RRBs till the first week of June
2013. This counts 56 as of March 2015. On 31 March 2006, there were 133 RRBs (post-merger)
covering 525 districts with a network of 14,494 branches. All RRBs were originally conceived as low
cost institutions having a rural ethos, local feel and pro poor focus. However, within a very short time,
most banks were making losses. The original assumptions as to the low cost nature of these
institutions were belied. This may be again amalgamated in near future. At present there are 56
RRBs in India.

Legal Existence and Protection

RRB's are recognized by the law and they have legal significance.The Regional Rural Banks Act,
1976 Act No. 21 Of 1976 [9 February 1976.] reads
"For the incorporation, regulation and winding up of Regional Rural Banks with a view to developing
the rural economy by providing, for the purpose of development of agriculture, trade, commerce,
industry and other productive activities in the rural areas, credit and other facilities, particularly to the

small and marginal farmers, agricultural laborers, artisans and small entrepreneurs, and for matters
connected therewith and incidental thereto".

List of Regional Rural banks

1. Allahabad UP Gramin Bank,
2. Andhra Pradesh Grameena Vikas Bank,
3. Andhra Pragathi Grameena Bank,
4. Arunachal Pradesh Rural Bank,
5. Assam Gramin Vikash Bank,
6. Bangiya Gramin Vikash Bank,
7. Baroda Gujarat Gramin Bank,
8. Baroda Rajasthan Ksethriya Gramin Bank,
9. Baroda UP Gramin Bank,
10. Bihar Gramin Bank,
11. Central Madhya Pradesh Gramin Bank
12. Chaitanya Godavari Grameena Bank,
13. Chattisgarh Rajya Gramin Bank,
14. Dena Gujarat Gramin Bank,
15. Ellaquai Dehati Bank,
16. Gramin Bank Of Aryavrat,
17. Himachal Pradesh Gramin Bank,
18. Jammu And Kashmir Grameen Bank,
19. Jharkhand Gramin Bank,
20. Karnataka Vikas Grameena Bank,
21. Kashi Gomti Samyut Gramin Bank,

22. Kaveri Grameena Bank,

23. Kerala Gramin Bank,
24. Langpi Dehangi Rural Bank,
25. Madhya Bihar Gramin Bank,
26. Madhyanchal Gramin Bank,
27. Maharashtra Gramin Bank,
28. Malwa Gramin Bank,
29. Manipur Rural Bank,
30. Marudhara Rajasthan Gramin Bank,
31. Meghalaya Rural Bank,
32. Mizoram Rural Bank,
33. Nagaland Rural Bank,
34. Narmada Jhabua Gramin Bank
35. Odisha Gramya Bank,
36. Pallavan Grama Bank,
37. Pandyan Grama Bank,
38. Paschim Banga Gramin Bank,
39. Pragathi Krishna Gramin Bank,
40. Prathama Bank,
41. Puduvai Bharathiar Grama Bank,
42. Punjab Gramin Bank,
43. Purvanchal Bank,
44. Saptagiri Grameena Bank,

45. Sarva Haryana Gramin Bank,

46. Sarva UP Gramin Bank,
47.Saurashtra Gramin Bank,
48. Sutlej Gramin Bank,
49. Telangana Grameena Bank,
50. Tripura Gramin Bank,
51. Utkal Grameen Bank,
52. Uttar Bihar Gramin Bank,
53. Uttarakhand Gramin Bank
54. Uttarbanga Kshetriya Gramin Bank,
55. Vananchal Gramin Bank,
56. Vidharbha Konkan Gramin Bank,