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Banking and Financial Institutions With MCQs RRB By Navdeep Kaur
Regional Rural Banks are local level banking operating in different States of India. They have been created with a view to serve primarily the rural areas of India wit!h basic banking and financial services. However, RRBs may have branches set up for urban operations and their area of operation may include urban areas too. The area of operation of RRBs is limited to the area as notified by Government of India covering one or more districts in the State. RRBs also perform a variety of different functions. RRBs perform various functions in following heads: Providing banking facilities to rural and semi-urban areas Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc. Providing Para-Banking facilities like locker facilities, debit and credit cards.
The development process of RRBs started on 2 October 1975 with the forming of the first RRB, the Prathama Bank with authorised capital of Rs. 5 crore at its starting. Also on 2 October 1975 five regional rural banks were set up with a total authorised capital Rs. 100 crore ($10 Million) which later augmented to 500 crore ($50 million) The Regional Rural Banks were owned by the Central Government, the State Government and the Sponsor Bank (Any commercial bank can sponsor the regional rural banks) who held shares in the ratios as follows Central Government-50%, State Government-15% and Sponsor Banks-35% RRB are recognized by the law and they have legal significance. The Regional Rural Banks Act, 1976 Act The RRB Act, 1986, empowers the Central Government to establish in a State or Union Territory one or more RRBs when any sponsor bank makes such a request The sponsor bank assists the RRB in many ways by subscribing to its share capital, by helping in its establishment, by assisting in recruitment and training of its cadre, and in general providing such managerial and financial assistance sought by the RRB.
The RRB functions within the local limits as specified by government notification. It can have its branches at any place as notified by the government. Structure and Organisation of the RRB: The authorised capital of an RRB is fixed at Rs. 1 crore and its issued capital at Rs. 2 lakhs. Of the issued capital, 50 per cent is to be subscribed by the Central Government, 15 per cent by the concerned State Government and the rest 35 per cent by the sponsoring bank The working and affairs of the RRB are directed and managed by a Board of Directors consists of a Chairman, three directors to be nominated by the Central Government, and not more than two directors to be nominated by the State Government concerned, and not more than 3 directors to be nominated by the sponsoring bank. The chairman is appointed by the Central Government and his term of office does not exceed five years.
Organizational structure The organizational structure for RRB's varies from branch to branch and depends upon the nature and size of business done by the branch. The Head Office of an RRB normally had three to seven departments. The following is the decision making hierarchy of officials in a Regional Rural Bank. Board of Directors Chairman & Managing Director General Manager Chief Manager/Regional Managers Senior Manager Manager Officer / Assist.
Functions of the RRB: The functions of the RRB are as follows: (1) Granting of loans and advances to small and marginal farmers and agricultural labourers, whether individually or in groups, and to co-operative societies, agricultural processing societies, co-operative farming societies, primarily for agricultural purposes or for agricultural operations and other related purposes; (2) Granting of loans and advances to artisans, small entrepreneurs and persons of small means engaged in trade, commerce and industry or other productive activities within its area of co-operation; and (3) Accepting deposits.
Amalgamation Currently, RRB's are going through a process of amalgamation and consolidation. 25 RRBs have been amalgamated in January 2013 into 10 RRBs. This counts 67 RRBs till the first week of June 2013. This counts 56 as of March 2015. On 31 March 2016, there were 56 RRBs (post-merger) covering 525 districts with a network of 14,494 branches All RRBs were originally conceived as low cost institutions having a rural ethos, local feel and pro poor focus. However, within a very short time, most banks were making losses. The original assumptions as to the low cost nature of these institutions were belied. This may be again amalgamated in near future. At present there are 56 RRBs in India.
Gramin Bank Of Aryavart, Himachal Pradesh Gramin Bank, Jammu And Kashmir Grameen Bank, Jharkhand Gramin Karnataka Vikas Grameena Bank, Kashi Gomti Samyut Gramin Bank, Kaveri Grameena Bank Kerala Gramin Bank, Langpi Dehangi Rural Bank, Madhya Bihar Gramin Bank, Madhyanchal Gramin Bank, Maharashtra Gramin Bank, Malwa Gramin Bank, Manipur Rural Bank, Rajasthan Marudhara Gramin Bank, Meghalaya Rural Bank, Mizoram Rural Bank Nagaland Rural Bank, Narmada Jhabua Gramin Bank List of Regional Rural banks Allahabad UP Gramin Bank, Andhra Pradesh Grameena Vikas Bank, Andhra Pragathi Grameena Bank Arunachal Pradesh Rural Bank, Assam Gramin Vikash Bank Bangiya Gramin Vikash Bank, Baroda Gujarat Gramin Bank, Baroda Rajasthan Ksethriya Gramin Bank, Baroda UP Gramin Bank, Bihar Gramin Bank Central Madhya Pradesh Gramin Bank Chaitanya Godavari Grameena Bank Chhattisgarh Rajya Gramin Bank, Dena Gujarat Gramin Bank, Ellaquai Dehati Bank
Odisha Gramya Bank, Pallavan Grama Bank, Pandyan Grama Bank, Paschim Banga Gramin Bank, Pragathi Krishna Gramin Bank Prathama Bank, Puduvai Bharathiar Grama Bank, Punjab Gramin Bank, Purvanchal Bank, Saptagiri Grameena Bank, Sarva Haryana Gramin Bank, Sarva UP Gramin Bank, Saurashtra Gramin Bank, Sutlej Gramin Bank, Telangana Grameena Bank, (Formerly known as Deccan Grameena Bank) Tripura Gramin Bank, Utkal Grameen Bank, Uttar Bihar Gramin Bank, Uttarakhand Gramin Bank, Uttarbanga Kshetriya Gramin Bank, Vananchal Gramin Bank Vidharbha Konkan Gramin Bank,
The Government of India recently approved the recapitalization of Regional Rural Banks (RRBs) to improve their Capital to Risk Weighted Assets Ratio CRAR) in the following manner: Share of Central Government i.e. Rs.1, 100 crore will be released as per provisions made by the Department of Expenditure in 2010-11 and 2011-12. However, release of Government of India share will be contingent on proportionate release of State Government and Sponsor Bank share. A capacity building fund with a corpus of Rs.100 crore to be set up by Central Government with NABARD for training and capacity building of the RRB staff in the institution of NABARD and other reputed institutions. The functioning of the Fund will be periodically reviewed by the Central Government. An Action Plan will be prepared by NABARD in this regard and sent to Government for approval. Additional amount of Rs. 700 crore as contingency fund to meet the requirement of the weak RRBs, particularly those in the North Eastern. and Eastern Region, the necessary provision will be made in the Budget as and when the need arises. Recapitalization is a type of corporate reorganization involving substantial change in a company's capital structure
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Development Banking In the Western countries, however, development banking had a long period of evolution. The origin of development banking may be traced to the establishment of 'Society General Pour Favoriser I' Industrie Nationale' in Belgium in 1822. But the notable institution was the 'Credit Mobiliser' of France, established in 1852, which acted as industrial financier In 1920, Japan established the Industrial Bank of Japan to cater to the financial needs of her industrial development. In the post-war era, the Industrial Development Bank of Canada (1944), the Finance Corporation for Industry Ltd. (FCI) and the Industrial and Commercial Finance Corporation Ltd. (ICFC) of England (1945), etc., were established as modern development banks to provide term loans to industry. In 1966, the U.K. Government set up the Industrial Reorganisation Corporation (IRC) In India, the first development bank called the Industrial Finance Corporation of India was established in 1948.
Liberalization conversion into company in 1993 By the early 1990s, it was recognized that there was need for greater flexibility to respond to the changing financial system. It was also felt that IFCI should directly access the capital markets for its funds needs. It is with this objective that the constitution of IFCI was changed in 1993 from a statutory corporation to a company under the Indian Companies Act, 1956. Subsequently, the name of the company was also changed to "IFCI Limited" with effect from October 1999.
Functions: (i) The corporation grants loans and advances to industrial concerns (ii) Granting of loans both in rupees and foreign currencies. (ii) The corporation underwrites the issue of stocks, bonds, shares etc (iv) The corporation can grant loans only to public limited companies and co-operatives but not to private limited companies or partnership firms.
Activities of the IFCI 1. Soft Loan Assistance: This scheme provides soft loan assistance to existing industries in small and medium sector for developing technology through in-house research and development. 2. Entrepreneur Development: IFCI provides financial support to EDPs (Entrepreneur Development Programmes) conducted by several agencies all-over India. In co-operation with Entrepreneurship Development Institute of India. 3. Industrial Development in Backward Areas: IFCI also take measures to promote industrial development in backward areas through a scheme of concessional finance.
4. Subsidised Consultancy: The IFCI gives subsidised consultancy for, (i) Small Entrepreneurs for Meeting the Cost of 5. Management Development: Project. (ii) Promoting Ancillary Industries (i) To do the Market Research (iv) Reviving Sick Units. (v) Implementing Modernisation (vi) Controlling Pollution in Factories. To improve the professional management the IFCI sponsored the Management Development Institute in 1973. It established the Development Banking Centre to develop managerial, manpower in industrial concern, commercial and development
Working of the IFCI: The working of the IFCI came in for a large measure of criticism. In the first place, the rate of interest which the corporation charged was extremely high. Secondly, there was a great delay in sanctioning loans and in making the amount of the loans available. Thirdly, the corporation's insistence on the personal guarantee of managing directors in addition to the mortgage of property was considered wrong In the last two decades the corporation had entered into new lines of activity, viz, underwriting debentures and shares and guaranteeing of deferred payment in respect of imports from abroad of plant an equipment by industrial concerns and subscribing to stocks and shares of industrial concerns directly Besides, the performance of IFCl together with the work of other public sector financial institutions has been extremely credit worthy in the last two decades.