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.