HPAS/Allied Mains 2022 Answer Writing Challenge Day 26: Model Answer

Question: Explain briefly the characteristics and the objective behind setting up of the  Regional Rural Banks in India?(8 marks, 120 words)

Answer: 

Introduction:

• Regional Rural Banks were established under the provisions of an Ordinance in 1975 and the RRB Act 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors.
• RRBs were set up as regional based and rural oriented institutions with capital contributed by Government of India, State Government and Sponsor Bank under the RRB Act, 1976.
• Regional Rural Banks (RRB) are Indian Scheduled Commercial Banks ( Government Banks) operating at regional level in different states of India.

BODY

• RRBs have been created with a view of serving primarily the rural areas of India with basic banking and financial services.
• The basic objective of RRBs was to function as professionally managed alternative channel for credit dispensation to small and marginal farmers, agricultural labourers, socioeconomically weaker section of population for development of agriculture, trade commerce, small scale industry and other productive activities in rural areas.
• RRBs are expected to mobilise resources and deploy the same locally, thus playing a significant role in developing agriculture and rural economy.

• 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 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 pension etc.
• Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, UPI etc.

CONCLUSION

• To keep pace with time, the RRBs must move towards digitization, including offering internet banking services to its customers and expanding their credit base further through increased lending to the Micro, Small, and Medium Enterprises (MSME) sector.
• Further, theyneed to increase their efficiencyand touch various other dimensions of banking that could increase their profitability.