About Regional Rural Banks (RRBs):
- RRBs are financial institutions established to provide financial services to rural areas.
- They are formed in collaboration by the Central Government, State Governments, and Sponsoring Commercial Banks to give loans to rural areas.
- The main objectives of setting up the RRB is to provide credit and other facilities, especially to the small and marginal farmers, agricultural labourers, artisans, and small entrepreneurs in rural areas.
- Origin:
- RRBs were set up on the basis of the recommendations of the Narasimham Working Group (1975) and after the legislation of the Regional Rural Banks Act, 1976.
- Ownership: The equity of an RRB is held by the Central Government, concerned State Government and the Sponsor Bank in the proportion of 50:15:35.
- The RRBs combine the characteristics of a cooperative in terms of the familiarity of the rural problems and a commercial bank in terms of its professionalism and ability to mobilise financial resources.
- The area of operation of RRBs is limited to the area as notified by the Government of India, covering one or more districts in the State.
- The RBI has set a Priority Sector Lending (PSL) target of 75% of total outstanding advances for RRBs as against 40% for Scheduled Commercial Banks.
- Sources of Funds: It comprises owned funds, deposits, borrowings from NABARD, sponsor banks and other sources, including SIDBI and the National Housing Bank.
- Regulation: RRBs are regulated by the RBI and supervised by the National Bank for Agriculture and Rural Development (NABARD).
- Management: The Board of Directors manages these banks, overall affairs, which consists of one Chairman, three Directors as nominated by the Central Government, a maximum of two Directors as nominated by the concerned State Government, and a maximum of three Directors as nominated by the sponsor bank.
