REGIONAL RURAL BANK - ECONOMY

News: Nirmala Sitharaman chairs review meeting of RRBs in Southern Region

 

What's in the news?

       Union Finance Minister Nirmala Sitharaman chaired the review meeting in Chennai with the chairpersons and senior officials of the Regional Rural Banks (RRBs) in the southern region.

 

Key takeaways:

       Ms. Sitharaman stressed that RRBs should continue their focus on the flagship schemes of the Central government such as PM Jan Dhan Yojana, PM Mudra Yojana and PM SVANidhi.

       She noted that in credit-deposit ratio, Gross NPAs and Provision Coverage Ratio, the RRBs in the southern region fared better than the national average.

 

Regional Rural Banks (RRBs):

       The Regional Rural Banks (RRBs) were first set up on 2 October 1975 (only 3 in numbers) with the aim to take banking services to the doorsteps of the rural masses especially in the remote areas with no access to banking services.

 

Objectives:

       To provide credit to the weaker sections of the society at concessional rate of interest who previously depended on private money lending.

       To mobilise rural savings and channelise them for supporting productive activities in the rural areas.

 

Contribution:

       The Gol, the concerned state government and the sponsoring nationalised bank contribute the share capital of the RRBS in the proportion of 50 percent, 15 percent and 35 percent, respectively.

       The area of operation of the RRB is limited to notified few districts in a state.

 

Committees and Suggestions:

       Following the suggestions of the Kelkar Committee, the government stopped opening new RRBs in 1987-by that time their total number stood at 196.

       Due to excessive leanings towards social banking and catering to the highly economically weaker sections, these banks started incurring huge losses by early 1980s. For restructuring and strengthening of the banks, the governments set up two committees-the Bhandari Committee (1994-95) and the Basu committee (1995-96).

 

Key takeaways:

       The obligation of concessional loans was abolished and the RRBs started charging commercial interest rates on its lending.

       The target clientele (rural masses, weaker sections) was set free now to lend to anybody.