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Banking in rural area

CONTENTS

INDIAN BANKING SYSTEM

SCHEDULED BANK (338)

NON SCHEDULED BANKS (4)

FOREIGN BANKS

PUBLIC SECTOR BANKS

PRIVATE SECTOR BANK

NATIONALISED

REGIONAL RURAK BANKS

STATE BANK OF INDIA

ASSOCIATES OF STATE BANK

NATIONALISED (6) JULY19 1969

NATIONALISED(4) APRIL 15 1980

NABARD (National Bank for Agriculture and Rural Development)

Spheres of activities
NABARD provides refinance for short ,medium and long term loans
under farm and non-farm sector.

It also provides short-term loan assistance to state co-operative


banks on behalf of DCCBs &RRBs for financing seasonal agricultural operations.

Purchases/Procurement and distribution of agricultural fertilizer and


other inputs likewise.

Medium term loan facilities are available to co-operative banks for


approved agricultural purposes

Contd
Short term refinance facilities under non-farm sector include
credit limit to SCBs, DCCBs for meeting working capital requirements.

Short term credit facilities are also available for RRBs

&commercial banks for financing non agricultural activities.

it also provides refinance to banks for financing government


sponsored programes.

NABARD has introduced a floating refinance rate for


advances over Rs. 2lakhs in respect of commercial banks.

Functions of NABARD
Serves as an apex refinancing agency for institution
promoting various development activities in rural areas.

Takes measures towards institutions for improving.


&monitoring, rehabilitation, restructuring of credit.

It will provide refinance credit for promotion of economic


activities in rural areas.

It will grant loans and advances to state government for


periods not exceeding 20yrs.

Contd..
NABARD shall be responsible for development relating to
rural credit.

It will take inspections in co-oprative banks and RRBs. Co-ordinate rural financing activities of all institutions
engaged in development work.

Undertake monitoring and evaluation of projects. It will maintain research and development fund to promote
research in agricultural an rural development.

RRBS (Regional Rural Banks)

Functions of RRBs
RRBs are mainly required to open branches & spread
their network in remote rural areas. They are required to mobilize deposits & to promote saving habits among rural people. They are required to dispense credit in favor of economically weaker sections of population. To provide banking facilities. avoid competition with other banks in rural areas. To

Problems of RRBs
Inadequate Deposit Mobilization.
Poor recovery of loans. More losses and less profit. Rate of vested interest group.

Contd.
Poor development of rural areas.
Lack of co-ordination. uncertain future of RRBs.

Measures to improve
Uniform policies.
Promote recovery. Support of government. Equipped with latest data.

Contd.
National rural bank.
Rationalize credit supply. proper coordination.

Difference between RRBs & Commercial Banks.


Basis of Difference

RRBs
The Regional rural Banks Act,1976 governs all the RRBs.

Commercial Banks
Whereas Commercial banks are governed by Banking Regulation Act 1949.

(1) Act Applicable

(2) Area of operation

The area of operation of RRBs is restricted to a region comprising of one or more districts in a state. RRBs is required to maintain 3%.

But the area of operation of commercial banks are unlimited.

(3)Cash reserves

commercial banks is required to maintain 9-10%.

Contd
Basis of Difference

RRBs
The RRBs are required to maintain 25% of SLR.

Commercial Banks
Whereas Commercial banks are required to maintain 37% of SLR.

(4) liquidity

(5) Cost of operation

The RRBs are expected to The cost of operation of work at lower cost. commercial banks are much higher.

(6) Refinance facility

RRBs enjoy the refinance facility.

No such facility of refinancing available to commercial banks.

Contd
Basis of Difference

RRBs
The RRBs recruit local people to ensure the local feel and familiarity.

Commercial Banks
Whereas Commercial banks recruit their staff on all India basis.

(7) Staff pattern

(8) Income tax payment

The RRBs are exempted from paying taxes on earning.

But the commercial banks have to pay corporate tax on interest earnings and other earnings.
Whereas the RBI performs the statutory inspection of commercial banks.

(9) Inspections

The NABARD has been authorized to have statutory inspection of the RRBs.

Conclusion
Rural banking has travelled long way since the first
nationalization of banks.

Government has aimed in accelerating rural


development.

overcome the difficulties and achieve rural


development by eradicating poverty and equal supply of money.

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