Important Component Of Indian Banking System

Regional Rural Banks are referred to as the Indian government-owned regulated commercial banks which function on a regional scale in several Indian states. The Indian government owns these banks through the Finance ministry. These were established to provide primary financial and banking facilities to those living in rural regions. The RRBs Act contains several laws governing the formation, regulation, and operation of RRBs. As per the Act, Regional rural banks need to be established primarily to strengthen rural economies by extending credit services for the growth of trade, agriculture, industry, commerce and other beneficial undertakings in rural regions. Such assistance is offered, especially, to marginal farmers, craftsmen, agricultural laborers, and local business people, as well as for other connected problems.

Sponsorship and Ownership

The sponsoring banks, state governments, as well as the union government, own a portion of the equity in Regional Rural Banks as follows:

• Sponsoring banks – 35%
• State governments – 15%
• Union government – 50%

The sponsoring banks play a significant role in the development of RRBs by offering assistance to RRBs personnel and management consulting to the institution for at least five years.

Objectives

The major goal of regional rural banks would be to boost the rural economic growth by offering loans and other services for agriculture as well as other beneficial enterprises in rural regions. They offer these services to marginal farmers, rural craftsmen, agricultural laborers, and so on.

RRBs have the following objectives:

• To make a loan available to the population of the lower socioeconomic status.
• To establish bank branches in remote regions.
• To protect rural impoverished people from moneylenders.
• To promote banking amongst rural residents and mobilize funds for economic growth.
• To provide more job prospects in rural regions through promoting commerce and trade.
• To promote rural entrepreneurship.
• To accommodate the demands of disadvantaged communities that aren’t being met by the government’s other initiatives.
• To strengthen impoverished regions and, as a result, to work toward eliminating regional economic disparities.
• To provide more job prospects in rural regions through promoting commercial activity.

Functions

• Loans and advances are made available to farmers as well as other individuals who are already involved in agricultural production.
• Loans and advances are made available to cooperative organizations and other entities involved in agricultural processing.
• Accepting all forms of contributions from the village and other nearby locations.
• Offering credit facilities to small business owners and those involved in trade, industry, and commerce.
• Establishment and upkeep of storage facilities and warehouses.
• Reducing the reliance of the poor on moneylenders.
• Attempting to take up the task of supplying agricultural equipment and materials to farmers.
• Making underdeveloped and tribal communities more economically viable by creating new branches, expanding microcredit facilities, as well as implementing the inclusion strategy.
• Regional Rural Banks, like commercial banks, provide agency as well as basic utility services to their clients as supplementary duties.
• RRBs provide agency services such as bill payments, money wire transfers, and foreign exchange.
• A rural bank also offers utility services like ATMs, debit card issuing, UPI, and locker facilities.

Necessity of RRBs

• Reduce the rural-urban divide through channeling funds as well as services to remote regions.
• Regional Rural Banks present an opportunity for the integration of the marginal population, such as small farmers, below-the-poverty-line (BPL) farmers as well as employees, small enterprises, craftsmen, women, and so on.
• Regional Rural Banks promote rural companies by offering short-term credit, insurance, and other services, and they help to strengthen the importance of small businesses in remote rural areas.
• Providing support to agricultural laborers in the form of mortgages, advances, as well as insurance for agricultural supplies, processing, equipment, marketing initiatives, and cooperative organizations aids in the expansion of agribusiness and the progress of farmers.
• Due to minor financial demands, lower salaries, and other factors, many financial institutions do not engage with marginal farmers as well as rural communities. In such circumstances, a distinct banking system is essential to defend these areas’ interests.

Conclusion

Regional rural banks are tasked with meeting the requirements of rural communities in impoverished areas and promoting financial inclusion at the grassroots level. The primary goal of RRBs is to offer loans and other financial services to marginal farmers, small craftspeople, agricultural laborers and other individuals. The Regional rural banks are concerned about providing access to financial services as well as credit facilities to underprivileged rural communities. They aid in the development of cooperative organizations, agricultural groups, and so on. RRBs diminish farmers’ and the lower classes’ reliance on conventional sources including moneylenders.