All About Regional Rural Banks - One Liner Bites

All About Regional Rural Banks - One Liner Bites

Regional Rural Bank (RRBs) or Gramin Banks were established in the year 1975 under RBI ACT 1976 to serve the rural areas of India with basic banking and financial services.

Primary Function of RBI:

• RRB provides banking facilities at rural and semi-urban areas.
• RRB carries out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc.
• RRB provides Para-Banking facilities like locker facilities, debit and credit cards.

History on the Formation of RRB:

• RRB was set up on the recommendations of the Narasimham Committee.
• Indira Gandhi was the then Prime Minister of India.
• It was set up as almost 70% of the nation was rural area.
• The first RRB to be set up was the Prathama Bank, sponsored by Syndicate Bank on October 2, 1975 in Uttar Pradesh.
• The Regional Rural banks were owned by the Central Government, State Government and Sponsor Banks.

The shares were held in the following ratios:

• Central Government-50%
• State Government – 15% 
• Sponsor Banks – 35%

Sponsor banks and other Financial Institutions were required to maintain managerial and financial assistance to RRB.

Structure of RRB:

The hierarchy of Regional Rural Bank is as follow:

•  Board of Directors
• Chairman & Managing Director
• General Manager
• Chief Manager or Regional Managers
• Senior Manager
• Manager
• Officer or Assistant

Recapitalization of RRB:

• The Chakrabarty Committee reviewed the financial position of all RRBs in 2010 and recommended for recapitalization.
• According to the committee, RRBs had to maintain CRAR of at least 7% as of 31 March 2011 and at least 9% from 31 March 2012 onwards. Recapitalization requirement of Rs. 2,200.00 crore for 40 of the 82 RRBs.
• A fund of Rs. 100 crore to be set up for training and capacity building of the RRB staff.
• The regulatory authority of these RRBs is NABARD.
• RBI allowed the RRBs to maintain a lower level of SLR than commercial banks.
• Amalgamation of RRBs
• Under the Dr Vyas Committee Recommendations, amalgamation of RRBs took place in 2013.
• 25 RRBs have been amalgamated in January 2013 into 10 RRBs.
• As a result of amalgamation, number of the RRBs reduced from 196 to 64 as on 31 March 2013.
• At present there are 56 RRBs in India.
• All states in India have RRBs, except Sikkim and Goa.