RRB and its Functions

The Regional Rural Banks or RRBs are commercial banks in India. These banks are empowered to conduct financial transactions to promote growth and development in rural areas. These are commercial scheduled banks. These banks operate on a regional level and cater to the underprivileged masses. The RRB and its functions are crucial to understanding every aspect of the banking system and spreading awareness about the different types of banks operating in the country. The Regional Rural Bank Act passed in 1976. Injecting credit into the rural system and providing financial aid to small and region-based artisans, labourers, farmers, or businessmen.

RRB

The RRB and its functions make up an important section in the study of the banking system in non-urban regions and are instrumental in promoting small handicraft-based artisans and agricultural farmers in villages. The Regional Rural Bank Act passed in 1976. More than 40 RRBs are functioning all over the country being sponsored by the Indian Government. The introduction of the RRB was an initiative to strengthen the banking sector in India. It was observed in the 20th century that banking opportunities were not equitably distributed amongst all classes of people. Especially suffering were the underprivileged and marginalised sections of the communities. So, the effort was taken by the Government to introduce a scheme through which everyone could avail of banking services.

RRB and its Functions

The Regional Rural Banks or RRBs are commercial banks in India. The recapitalisation of RRBs is sponsored by the central bank. These banks are empowered to conduct financial transactions to promote growth and development in rural areas. RRB as a mix of cooperative and commercial banks has certain features:

• Provide easy and accessible banking
• Support and promote local artisans, MSMEs (Medium-Small Sized Businesses), and agricultural farmers
• Mobilise regional financial resources
• Operate on the district as well as state-level

RRB and its functions include:

• Extend loans to artisans, farmers, labourers, and MSMEs
• Accepting savings and other forms of deposits
• Distributional and disbursement of pension and wages
• Providing internet banking
• UPI services
• Provide credit facility in the agricultural department, renewable energy sources, and cultural initiatives

The RRBs are owned by the state, central governments, and sponsoring banks. The RRBs are often subjected to amalgamations which cause a fluctuation in their number over the country.

Regional Rural Bank Organisation

The Regional Rural Bank is organised as any other commercial bank. The ownership is shared between the state government (15%), sponsored banks (35%), and the central bank (50%). These sponsor banks are important as they provide much-needed consultancy and training programmes for the employees. There is a board of directors, Chairman, Managing director, senior manager, and other important posts which are normally found in the organisational structure of a commercial bank. It was due to the operation of that RRB that many localised industries did not go bankrupt during the pandemic situation.

Regional Rural Bank Act

The Regional Rural Bank Act passed in 1976. The establishment of RRBs however was sanctioned a year prior on September 26th. Initially, 5 RRBs were inaugurated but then gradually the number increased. Within a year of passing, 25 banks were established. A Regional Rural Bank definition includes a commercial bank that carries out financial transactions in rural areas for its financial development.

Conclusion

In 2020, recapitalisation will be carried out for the RRBs. Hence, the RRBs were established to bridge the gap between the urban population and the rural population. RRBs have characteristics of cooperative societies and commercial banks in India.