CAPSTONE PROJECT

ON

STUDY ON RURAL BANKING IN INDIA AND IT’S FUTURE

SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIRMENTS FOR THE
MASTER’S DEGREE IN BUSINESS ADMINISTRATION
OF
CHANDIGARH UNIVERSITY, GHARUAN, MOHALI

Supervised by: Submitted by:

Name: Mr. Praveen Kumar Abrol Name: Anamika Sankhwar

Designation: Assistant Professor UID: 21MBA1646

CHANDIGARH UNIVERSITY, GHARUAN, MOHALI

BATCH 2021-2023

1
 ACKNOWLEDGEMENT

I hereby do solemnly acknowledge that I have taken my sincerest efforts in this project.
However, it would not have been possible without the support and help of many individuals
and organizations indulged along the way. I would like to extend my sincere thanks to all of
them.

I am highly indebted to MR.PARVEEN KUMAR ABROL for his guidance and the
constant supervision as well as for providing all the necessary information to me regarding
the project and also for the support in completing the project.

I would like to express my sincere gratitude towards my parents, friends & members for their
kind co-operation and encouragement which help me in completion of this project.

I would also like to express my special gratitude and thanks to the industry persons for giving
me such kind attention and time. My thanks and appreciations also go to all of my colleague
who formed a part in developing the project and the people who have willingly helped me out
with their special abilities.

2
 CERTIFICATE (BY THE SUPERVISOR/ GUIDE)

I have the pleasure in certifying that Anamika Sankhwar is a bonafide student of 4th
Semester of the Master’s Degree in Business Administration (Batch 2021-2023), of
Chandigarh University, Gharuan, Mohali, Punjab with UID No.21MBA1646
She has completed his/her Capstone project work “RURAL BANKING IN INDIA AND
IT’S FUTURE” under my guidance.

I certify that this is his/her original effort & has not been copied from any other source. This
project has also not been submitted in any other institute / University for the purpose of
award of any Degree.

This Project fulfils the requirement of the curriculum prescribed by this university for the said
course. I recommend this project work for evaluation & consideration for the award of
Degree to the student.

Signature :___________
Name of the Guide: PARVEEN KUMAR ABROL
Designation : ASSISTANT PROFESSOR
Date : ___________

3
 EXECUTIVE SUMMARY

Since India is agriculture oriented country, the importance of rural banks in India is
more than any other countries. The development of rural banks in India is on the
process but still it is not fully developed.

The Rural banks in India was started in 1975.Rural banking in India is the result of a
deliberate policy of the state and is vigorously pursued through formation of an
elaborate governing infrastructure.
In India we find that the states of Maharashtra and Gujarat are well developed.
Whereasthe states of Andhra Pradesh, Rajasthan and Karnataka have shown
remarkable progress in the Rural banks and there is a vast potential for the
development of RRBs inthe remaining states.

This project is mainly focusing on the importance of Rural bank in the regional rural
areas of our country. Because of that reason The Government has introduced several
schemes for promoting the spirit of co-operation. Both the Indian Government as
wellas the Government of the State of Maharashtra has introduced several schemes for
the RRBs bank. The NABARD role in the building of the rural credit structure was
that of an active collaborator in drawing up schemes of development with the
government of India and the State Governments, and the provider of finance, first to
the State Governments for contribution to the share capital of Rural credit institutions
at various levels.

4
 TABLE OF CONTENTS

ACKNOWLEDGEMENT ......................................................................................................... 2

EXECUTIVE SUMMARY……………………………………………………………………4

Chapter 1: Introduction .............................................................................................................. 6

Chapter 2: Literature Review ................................................................................................... 19

Chapter 3: Research Methodology........................................................................................... 25

Chapter 4: Findings & Interpretations ..................................................................................... 28

Chapter 5: Conclusion and recommendations ......................................................................... 44

Chapter 6: Limitations ............................................................................................................. 47

Annexure (QUESTIONNAIRE) .............................................................................................. 48

Bibliography and references .................................................................................................... 50

PLAGIARISM Report 50

5
 CHAPTER 1

INTRODUCTION

6
Our nation is supported by its villages. India is a country with a big rural
population that engages in agriculture and its related activities on a larger scale.
These activities revenue accounts for a larger portion of India’s GDP. It is well
recognised that the banking system is the engine driving the growth of any nation's
economy and will always be the deciding factor in the fiercely competitive global
economic world. They are growing, producing profitably, and have good quality
assets. Prior to the introduction of cooperative banking, which was intended to
strengthen the rural credit mechanism, this sector was similarly unable to meet the
financial needs of the rural areas. This insufficient scenario prompted the Indian
government to establish a committee to identify workable solutions to enable
simple mechanisms for rural credit satisfaction. Regional Rural Banks were
recommended to be established by the committee led by Shri. M. Narasimhan in
1975. The regional rural bank in India is particularly concerned with providing
credit to rural residents. Regional Rural Banks of India meets the financial needs
of rural residents for their agricultural and agro -based businesses, and as a result,
they make money from their banking activity to fund their operations. Rural
banking in India refers to the provision of banking and financial services to the
rural population in the country. It plays a crucial role in promoting financial
inclusion and economic development in rural areas, which constitute a significant
proportion of India's population.

Over the years, the rural banking sector in India has undergone significant reforms,
with the government and the Reserve Bank of India (RBI) taking several measures
to improve access to financial services in rural areas. However, despite these
efforts, a significant proportion of the rural population still remains unbanked or
underbanked. There are several challenges to rural banking in India, including a
lack of financial literacy and awareness, poor infrastructure, and the prevalence of
informal financial channels. However, the introduction of technology-enabled
financial services, such as mobile banking and digital payments, has the potential
to revolutionize the rural banking sector in India.

In the future, rural banking in India is likely to witness significant growth and
innovation, driven by a combination of technology, policy initiatives, and private
sector investment. This presents both opportunities and challenges for
stakeholders, including banks, government agencies, and NGOs, to promote
financial inclusion and economic development in rural areas.
In this project, I have focused mainly on the future of Rural Banking in India
and also highlighted on several other information and issues.

7
BANKING POLICY IN RURAL INDIA: 1969 TO PRESENT

The period from 1969 to the present can be characterised as representing, broadly speaking,
three phases in banking policy vis-à-vis the Indian countryside. The first was the period
following the nationalization of India’s 14 major commercial banks in 1969. This was also the
early phase of the ‘green revolution’ in rural India, and one of the objectives of the
nationalization of banks was for the state to gain accessto new liquidity, particularly among
rich farmers, in the countryside. The declared objectives of the new policy with respect to rural
banking - what came to be known as “social and development banking” - were (i) to provide
banking services in previously unbanked or under-banked rural areas; (ii) to provide substantial
credit to specific activities, including agriculture and cottage industries; and (iii) to provide
credit to certain disadvantaged groups such as, for example, Dalit and Scheduled Tribe
households.
The introduction of social and development banking policy entailed a radical shift from
prevalent practice in respect of the objective and functioning of commercial banks. An
important feature of the policy of social and development banking was that it recast completely
the role of commercial banks in rural banking. Prior to 1969, the countryside was not
considered to be the problem of commercial banks.5 It was only after 1969 that a multi-
institutional approach to credit provision in the countryside became policy, with commercial
banks, Regional Rural Banks and cooperative institutions establishing wide geographical and
functional reach in the Indian countryside.
The Reserve Bank of India (RBI) issued specific directives with respect to social and development
banking. These included setting targets for the expansion of rural branches, imposing ceilings on
interest rates, and setting guidelines for the sectoral allocation of credit. Rural credit was an
important component of the ‘green revolution’ package; the first post-nationalization phase of
expansion in rural banking saw a substantial growth in credit advances for agriculture. Specifically,
a target of 40 per cent of advances for the “priority sectors,” namely agriculture and allied activities,
and small-scale and cottage industries, was set for commercial banks. Advances to the countryside
increased substantially, although they were, as was the green revolution itself, biased in respect of
regions, crops and classes.
The second phase, which began in the late 1970s and early 1980s, was a period when the rhetoric
of land reform was finally discarded by the ruling classes themselves, and a period when the major
instruments of official anti-poverty policy were programmes for the creation of employment. Two
strategies for employment generation were envisaged, namely wage-employment through state-
sponsored rural employment schemes and self-employment generation by means of loans-cum-
subsidy schemes targeted at the rural poor. Thus began a period of directed credit, during which
credit was directed towards “the weaker sections.” The most important new scheme of this phase
was, of course, the Integrated Rural Development Programme or IRDP, a scheme for the creation
of productive income-bearing assets among the poor through the allocation of subsidized credit.
The IRDP was initiated in 1978-79 as a pilot project and extended to all rural blocks of the country
in 1980. There is much writing on the failure of IRDP to create long-term income bearing assets in
the hands of asset-poor rural households. Among the many reasons for this failure were the absence
of agrarian reform and decentralized institutions of democratic government, the inadequacy of
public infrastructure and public provisioning of support services and the persistence of
employment-insecurity and poverty in rural society. Nevertheless, the IRDP strategy did lead to a
significant transfer of funds to the rural poor.

8
The third and current phase, which began in 1991, is that of liberalization. The policy
objectives of this phase are encapsulated in the Report of the Committee on the Financial
System, which was chaired, ironically, by the same person who recommended the
establishment of Regional Rural Banks, M. Narasimham (RBI, 1991). In its very first
paragraph, the report called for “a vibrant and competitive financial system…to sustain
the ongoing reform in the structural aspects of the real economy.” The Committee said
that redistributive objectives “should use the instrumentality of the fiscal rather than the
credit system” and, accordingly, that “directed credit programmes should be phased out.”
It also recommended that interest rates be deregulated, that capital adequacy norms be
changed (to “compete with banks globally”), that branch licensing policy be revoked,
that a new institutional structure that is “market-driven and based on profitability” be
created, and that the part played by private Indian and foreign banks be enlarged. Let us
make it clear that, before the 1990s, the banking system was open to much criticism,
particularly of its bureaucratic failures, its insensitivity to the social and economic
contexts in which it functioned, and class and regional inequalities in lending patterns.
The reforms proposed in 1991, however, were not attempts to bring rural banking closer
to the poor, but to cut it back altogether and throw the entire structure of social and
development banking overboard.

Distribution Channel of Rural Banking - Multi-agency Approach to

Rural Lending

Rural credit has been a laboratory for various policies, initiatives, investigations and
improvements since 1955.The first major strategy adopted for improving rural credit
delivery was the institutionalization of the credit delivery system with the cooperative as the
primary channels. The multi-agency approach to the rural credit delivery emerged with the
induction of the commercial banks into the scene. In 1979, specialized institutions called
Regional Rural Banks and subsequently, another breed of institutions called Local Area
Banks, came on the scene. With the operationalisation of the Lead Bank Scheme, the area
approach to rural lending was formalized and attempts were made to match infrastructure
development with bank credit flows for ensuring development of the rural areas. The Scheme
sought to give a special supply-leading role to the banking system in rural development and
also to ensure access of the rural population to bank services through rural branch expansion.
A multi-agency credit delivery system is in place for financing credit-based development
activities, under the Lead Bank Scheme. In 1988, the Service Area Approach was also
introduced as a strategy for improving the quality of rural lending. The Lead Bank Scheme
Information System and Service Area Monitoring Information System (SAMIS) have also

9
been operationalised using monitoring arrangements. The micro-finance and linkage of the
banks to the self- helpgroups / NGOs and the issue of Kisan Credit Cards are among the
recent developments in the area of rural lending in India. The latest policy initiatives are the
enabling of the Non-bank Financial Companies and of the “correspondent “banking for
increasing delivery of rural credit.

The National Agricultural Credit Review Committee (NACRC) headed by Prof. A S Khusru
has established that the cost of rural lending by commercial banks and cooperative banks is
unsustainable and does not break even In fact, it has been sustained through cross
subsidization. The two elements of the costs namely, capital costs and the current expenses
are of the rural branches. Rural bank branches are such that the transaction in the rural area
cannot support them.

The experiment of having low cost institution for rural lending in the form of Regional Rural
Banks also has not been successful in as much as the RRB staff expenses are required by
law to be on par those of the commercial banks. Therefore, it is clear that the rural credit
delivery system is not performing efficiently and in a cost effective manner. It is against this
background that we position a technology based solution for improving the speed efficiency
and effectiveness of the credit delivery of the rural people through the application of
information technology tools and systems. We propose Model for using Information
Technology for improving rural credit delivery system by reducing the cost, increasing the
speed of delivery and also increasing the value addition in the service delivery and improving
the accountability. The National Agricultural Credit Review Committee Report documents
the history, development and the status of the various important issues involved in rural
credit delivery in India in great detail. It is interesting to know from this voluminous report
that solutions have been advised and implemented for almost all the real as well as
“perceived” problems in rural credit. Yet, this area remains a problem defying adequate
solution. For example, some of the key concerns like the end-use of credit, infrastructure
gaps, and the high costs of lending have been repeatedly attended to. Despite that, the
delivery of credit for agriculture and rural development still remains unsatisfactory. It has
been a matter of concern that the multi- institutional rural credit delivery system has not been
very successful in delivering required amount of credit to agriculture and small scale
industries and small and medium enterprises.i The share of bank credit for agriculture has
declined from 17.6 percent in 1985 to 9.8 percent in 2002.i The institutions are in place, the
systems repeatedly revamped several times on the basis of multiple committees are also in
place. In spite of this, the growths of the agricultural credit in the country during the last
three years have been less than the growth of credit for services and corporate sector. The
value addition to the GDP by the agriculture has been low as compared to the industry sector
and the services sector. The income disparities as reflected in the poverty are still a matter
of serious concern.

10
MAJOR RURAL BANKING PLAYERS IN INDIA

REGIONAL RURAL BANKS

The Narasimham committee on rural credit recommended the establishment of Regional
Rural Banks (RRBs) on the ground that they would be much better suited than the
commercial banks or co-operative banks in meeting the needs of rural areas. Accepting
the recommendations of the Narasimham committee, the government passed the
Regional Rural Banks Act, 1976. A significant development in the field of banking
during 1976 was the establishment of 19 Regional Rural Banks (RRBs) under the
Regional Rural Banks Act‚1976.

RRBs established with the explicit objective of –

• Bridging the credit gap in rural areas

• Check the outflow of rural deposits to urban areas
• Reduce regional imbalances and increase rural employment generation
The main objectives of setting up the RRB are to provide credit and other facilities‚
especially to the small and marginal farmers‚ agricultural labourers artisans and small
entrepreneurs in rural areas.
Each RRB will operate within the local limits specified by notification. If necessary‚ a
RRB will also establish branches or agencies at places notified by the Government.
Each RRB is sponsored by a public sector bank‚ which provides assistance in several
ways‚ viz., subscription to its share capital‚ provision of such managerial and financial
assistance as may be mutually agreed upon and help the recruitment and training of
personnel during the initial period of its functioning.

Regional Rural Banks in India-

The State Bank of India is one of the major commercial banks having regional rural
banks. There are 30 Regional Rural Banks in India, under the State Bank of India and it
is spread in 13 states across India. The number of branches the SBI Regional Rural Banks
is more than 2000. Several other banks, apart from the State Bank of India also functions
as the promoter of rural development in India.

11
List of Regional Rural Banks in India.
There are a number of regional rural banks in India. Following are the state-wise list of
Indian regional rural banks.

Andhra Pradesh
• Andhra Pradesh Grameena Vikas Bank
• Andhra Pragathi Grameena Bank
• Deccan Grameena Bank
• Chaitanya Godavari Grameena Bank
• Saptagiri Grameena Bank

Arunachal Pradesh
• Arunachal Pradesh Rural Bank

Assam
• Assam Gramin Vikash Bank
• Langpi Dehangi Rural Bank

Bihar
• Madhya Bihar Gramin Bank
• Bihar Kshetriya Gramin Bank

Chhattisgarh
• Chhattisgarh Gramin Bank
• Surguja Kshetriya Gramin Bank
• Durg-Rajnandgaon Gramin Bank

12
Gujarat
• Dena Gujarat Gramin Bank
• Baroda Gujarat Gramin
• Saurashtra Gramin Bank

Haryana
• Harayana Gramin Bank
• Gurgaon Gramin Bank

Himachal Pradesh
• Himachal Gramin Bank
• Parvatiya Gramin Bank

Jammu & Kashmir

• Jammu Rural Bank

The other Regional Rural Banks in India are –

Haryana State Cooperative Apex Bank Limited

The main purpose of the Haryana State Cooperative Apex Bank Limited is to financially
assist the artisans in the rural areas, farmers and agrarian unskilled labor, and the small
rural entrepreneurs of Haryana. Haryana State Cooperative Apex Bank Limited also
referred as the HARCOBANK, is one of the apex organizations in the state of Haryana.
The HARCOBANK holds a special economic position in the state of Haryana. The
Haryana State Cooperative Apex Bank Limited offers several types of financial
assistances to the individuals. The financial aids include credit for the promotion of
agriculture, non-agrarian credit, and bank deposit facilities. The HARCOBANK have
been functioning as an investor for more than three decades.

13
National Bank for Agriculture and Rural Development
The main purpose of the National Bank for Agriculture and Rural Development is to
provide credit for the development and publicity of small scaled industries, handicrafts,
rural crafts, village industries, cottage industries, agriculture, etc. The NABARD also
supports all other related economic operations in the rural sector, promotion of
sustainable growth in the rural sector. The NABARD also plays the role of a contributor
to the rural development by the means of promoting institutional development,
facilitating refinance to loan providers in the rural sector, inspection, monitoring, and
evaluation of client financial corporations. National Bank for Agriculture and Rural
Development (NABARD) was established as the premiere rural development bank.

Sindhanur Urban Souharda Co-operative Bank

The main purpose of the Sindhanur Urban Souharda Co-operative Bank is to provide
financial support to the rural sector. The Sindhanur Urban Souharda Co-operative Bank is
more commonly known as the SUCO Bank.

United Bank of India

The role played by the United Bank of India (UBI) as one of the regional rural banks is
phenomenal. The UBI has propagated the network of branches in order to actively take
part in the rural improvement and development.

Syndicate Bank
The Syndicate Bank has it grass roots in the rural sector. The development of the
Syndicate Bank was in accordance to the development of the banking sector in India and.
The Syndicate Bank has performed actively in the development of the rural sector in
India.
The Regional Rural Banks in India has actively contributed to the growth of the rural
sector. The growth of the rural industries in India and the development of the rural
business and economy have been dependent largely on the investment and financial aids
provided by the Regional Rural Banks in India.

Regional Rural Banks in Tamil Nadu

Indian Bank has sponsored two Regional Rural Banks (RRBs) viz., Saptagiri Grameena
Bank and Pallavan Grama Bank. Pallavan Grama Bank with Head Quarters at Salem is
operating in 14 districts of Tamil Nadu viz., Salem, Namakkal, Krishnagiri, Dharmapuri,
Villupuram, Cuddalore, Coimbatore, Karur, Erode, Nilgiris, Vellore, Tiruvannamalai,
Kancheepuram and Tiruvallur. The third RRB sponsored by Indian Bank is Puduvai
Bharathiar Grama Bank at Union Territory of Puducherry with its head quarters at
Puducherry.

14
Some refections on structural and operational problem of Regional
rural bank

Much of the success of RRB will depend on its structural soundness, adequacy of its
resources, management and operational efficiency and the role of associated agencies.

Requirement of structural efficiency

An important requirement of structural efficiency is determination of the area of
operation of a RRB in an appropriate way. A RRB may fail to attain satisfactory progress
if the area of its operation is not appropriate in terms of several criteria which maybe laid
down as follows:
1) Area of operation and branch expansion.
First of all there should be scope for opening new branches and new branches can
only be opened in places where banking facilities available are quite meager or
insufficient and where population of the target group is sizable. Compactness of
geographical area, availability of infrastructural facilities, homogeneity of resources
or type of production are also important factors that may influence decision in the
matter. The chairmen of RRB at their conference held during 4-6 November,1982
expressed their opinion that the area should be such as would provide scope for
opening 80 branches and sufficient business. It would neither depend upon the
number of branches nor on the extent of area of operation. of course compactness of
area is desirable from the point of view of management. As branch expansion was
found to have been costly without being matched by proportionate return a caution
needs to be sounded against rapid branch expansion without prior planning of
appropriate personnel. The area of operation should be such as will facilitate
monitoring and supervision of branches. In the absence of arrangement for
monitoring and adequate supervision of branches. In the absence of arrangement for
monitoring and adequate supervision by other than the head office, coverage of one
district may be ideal for RRB. A larger area, as in the case of Mallabhum Gramin
Bank, may result in neglect of supervision the impact of which on efficiency of
branch operation would be adverse.
2) Share Capital
Since most of RRB were found to have been experiencing losses, there should be an
assessment of real (exchangeable) value of their share capital after some years of
their start. Measures may be taken for protection against fall in the exchangeable
value of the share capital by fresh contribution from the concerned parties. It may
also be considered whether NABARD can join other agencies in contributing share
capital to the RRB. It seems that subscribing additional share capital to govern the
shortfall in the real/ exchangeable value would be advantageous than the sharing of
losses by the share-holders as the erosion could be recouped in later years on account
of profitable working results

15
3) Deposit mobilization
As the deposits are the important sources of any bank and no less in the case of RRBs
, mobilization of rural savings is an essential part to build up their resources. It
appears that though the RRB made progress in the mobilization of rural savings,
there is much scope of further progress when it is considered in relation to the total
size of agricultural working population of the area of operation. For giving impetus
to such deposit mobilization in the long-run, the following measures may be kept in
view:
1. As an incentive to the rural depositors, RRB may be permitted to grant loans
against deposits upto a certain proportion of the face value of the deposits.
2. RRB may be included in the approved list of banks of central and state
governments for the purpose of keeping the surplus funds and operating the accounts
of government Departments, semi-government bodies, local bodies like panchayats,
Municipalities, Agricultural product market committee etc.

4) Borrowings

RRBs are promoted mainly for meeting the credit requirements of weaker sections
in the rural areas and so to refinance should fill the gap between mobilization of own
resources and the total funding requirements of the rural poor. As the deposit
mobilization potentially is not uniformly spread in the area of operation of all RRBs,
the NABARD general line of refinance should be maintained. RRBs must
immediately form technical cells, either by re-deploying their existing officers who
are otherwise qualified and suitable as mentioned earlier or by recruitment new staff
for preparing schemes so that covering of term loans under schematic lending is
stepped up. The necessary financial assistance for NABARD may be utilized by the
RRBs for the purpose. Sponser bank refinance is kept as last resort by RRBs because
of higher rate of interest at 81⅟ ₂ %, while the refinance from other sources is cheaper.
If it is desired to avail sponser bank refinance on a larger scale, in preference to or
on par with other refinance, it is necessary to consider whether the rate of interest
charged by sponser bank can be brought down to that of NABARDs. RRBs are
experiencing administrative and procedural inconvenience/ delays in availing to
refinance from IDBI in respect of their small loans. So it is felt that a single agency
approach ie. Obtaining refinance in respect of composite loans for artisans and rural
industries etc. from NABARD would facilitate easy availability of refinance by
RRBs.

16
17
ABSTRACT
In India, the rural sector employs more than 70% of the workforce. There are
certain people who cannot access banking services in rural locations. To ensure
that people in rural India may access the financial system, India has created a
multi-layered approach. In an effort to restructure the weaker and poorer segments
of rural society, the Reserve Bank of India and the Indian government have
adopted the initiative of financial inclusion. Since the country's independence, the
decision-makers have understood the necessity and significance of banking services
nationwide. There are some studies, such as the "All India Rural Credit Survey" and
"All India Rural Credit Review," that have made it possible for commercial banks
to expand into rural areas and offer their banking services to a significant number
of people there.
It has been discovered that there is an increase in demand for rural financing for
infrastructure investment, production, farming, and consumer as well. Commercial
banks' assistance made rural banking exceedingly simple and accessible.
Commercial banks encounter a number of difficulties when providing banking
services in rural areas, including high transaction costs, a lack of infrastructure,
employee resistance, a large number of accounts with very low balances, and
security issues when carrying and transmitting cash using mobile banking in
some far locations.
In 1904, during British administration, cooperative banks established themselves
in India. In 1935, during India's British administration, the Reserve Bank of India
was also established. Although though commercial banking dates back to before
our nation gained its independence, the "All India Rural Credit Survey" (1954)
marks the beginning of serious attempts to develop rural banking. The "All India
Rural Credit Review," completed in 1969, presented the idea of social banking for
commercial banking as a result of the nationalisation of major banks in this series.
Banking grew simpler as a result of the information technology and
communication's rapid growth and enhancement. Significant improvements in
the process for land mortgage loans and other bank borrowings are also significant
components to the banking company's achievements. Consumers are faced with
the problem of bribe and other concerns since there is more focus placed on a
significant paperwork load and because it demands numerous, repeated trips to
the bank branches. The cost of transactions to acquire loans from banks for
farmers and rural residents is increased as a result of all these problems.
This problem has all the indicators of being an unfinished result of improper
authorisation of mandates to the booked business banks and RRBs in rearranging
tactics. Disentangling systems and simplicity in credit distribution require special
consideration in the context where banks are entrusted with the responsibility of
providing credit guidance to the growing network. A few issues that have emerged
as a result of a few investigations have also been presented. As it turns out, interest
rates on credit have increased in the provincial territories for both creation and
usage purposes. Rural banking is becoming a desirable proposition for commercial
banks.

18
 CHAPTER 2

LITERATURE
REVIEW

19
20
 OBJECTIVES

The importance of the rural banking in the economic development of a country

cannot be overlooked. As Gandhiji said —Real India lies in Villages, and
village economy is the backbone of Indian economy.

Without the upliftment of the rural

economy as well as therural people of our
country, the objectives of economic
planning cannot be achieved.
In fact, the real growth of Indian economy lied in the freeing of rural masses from acute
poverty,unemployment, and socio-economic backwardness.

Function of Rural banking:

According to banking commission, the rural banks should render the following functions:
1) To accept deposits;
2) To grant advances
3) To provide ancillary banking services
4) To supply inputs and equipments to farmers
5) To provide assistance in marketing of their products

Above all a rural bank has to help generally in the overall development of village in its
area. The banking commission held that rural banks should also extend credit and all
otherbanking services besides members/shareholders to the general public in their areas
by enrolling them as associate members.

Further the commission recommended that rural banks should be

governed by separate legislation to be enacted by the parliament.
The banking commission worked on further most detail of rural banks, such as
capital structure, management structure, dividend and interest rate policies,
deposit insurance, linkage with other government bodies especially with the
food corporation of India, in termsof its procurement functions in rural areas,
its terms of borrowing, etc.

The Commission also envisaged that all financial needs of the medium and
small farmers should be met by the rural banks

21
 1. To study marketing of rural banking in India.

2. To study comparative marketing of rural and urban banking in India.

3. To study about Institutional sources consist of the co-operative and commercial banks
including regional rural banks

4. To study about Non institutional or private sources including money lender traders
commission agents and landlords.

These were set up as government-sponsored, regional based rural lending institutions

under the Regional Rural Banks Act, 1976. Mission of RRBs is to fulfil the credit needs
of the relatively unserved sections in the rural areas, small and marginal farmers,
agricultural labourers, and socio- economically weaker sections.

In particular, the primary objective of rural banks is to meet the credit needs of
farmers and fishermen as well as of cooperatives and merchants in rural areas.
Regional rural banks (RRBs) provide critical development services and assist rural
residents in learning about digital banking services. Regional rural banks are vital for
financial inclusion and digital literacy in India's agriculture, and they play a critical
role in boosting digital literacy and economic growth.

Regional Rural Banks help the overall development of rural areas in the country. They
generate employment opportunities in such areas. They uplift the economy of rural areas
by providing them with credit facilities that people can utilize for running their trade
and business.
Banking with the specific needs of the community in mind.

Access to contemporary and advanced banking services in addition to the basic

ones Sensitizing the rural populace about the importance of banking services
Easy accessibility
Low cost of operations
Coming up with innovative, tailor-made financial solutions for rural masses

Positive role of rural banking:

1. Rural banking has helped in raising farm and non-farm out by providing services
and credit facilities to farmers.

2. It has helped in achieving food security which is reflected in the abundant stocks of grains.

3. It provides long-term loans with better repayment options. It, thus helps in
eliminating moneylenders from the scene.

4. It had a positive effect on income and employment especially after the green revolution.

22
 Negative aspect of rural banking:

1. The formal institutions (except commercial banks) of rural credit have failed to
develop a culture of deposit mobilisation.

2. The sources of institutional finance are inadequate to meet the requirements of agricultural
credit.

3. Vast proportion of rural households are out of the credit network as some kind
of collateral security is required for taking loan.

4. Small and marginal farmers receive only a very small portion of the institutional
credit as a large portion of institutional credit is taken away by the rich farmers.

5. Recovery of agricultural loans has become a serious problem.

Solutions to problems:
1. The banks should change their approach from just being lenders to building up
relationship banking with the borrowers.

2. The habit of thrift should be inculcated among the farmers.

3. The farmers should be guided how to make efficient utilisation of financial resources.

4. An effective mechanism for the recovery of agricultural loans should be evolved at the
earliest.

Cooperative credit societies in rural areas should be strengthened and their working should be
made transparent and efficient

23
 CHAPTER 3

RESEARCH
METHODOLOGY

24
NEED FOR THE STUDY

RRBs were formed to serve the rural inhabitants of India, the majority who were not having access to
banking. There are many institutions set up by the state government and central government and some
in collaboration. The main objective of this institution is to serve the rural population. But the
question is how effectively these banks have performed? To accomplish the objectives of the
paper, we collected various data from secondary sources. We used several data published in
annual statistics of RRBs, several news articles, books, newspapers and internet.

Research in common parlance refers to a search for knowledge. The advanced learner’s
dictionary of current English lays down the meaning of research as “a careful investigation of
enquiry especially through search for new facts in any branch of knowledge.” The systematic
approach concerning generalization and the formulation of a theory is also research. The
purpose of research is to discover answers to questions through the application of scientific
procedures.

“A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure.”
- JOHN.W.BEST

Research may be defined as “any organized inquiry designed and carried out to provide
information for solving a problem”.
– EMORY

“Research is essentially an investigation, a recording and an analysis of evidence for the

purpose of gaining knowledge”.
- ROBERT ROSS

25
DESCRIPTIVE RESEARCH DESIGN:

Descriptive research design studies are those studies, which are concerned with describing
the character of a group. The researcher makes a plan of the study his research work. That
will enable the researcher to save and resources such a plan of study or blue print or study is
called a research design.

Three main purposes of research are to describe, explain, and validate findings. Description
emerges following creative exploration, and serves to organize the findings in order to fit
them with explanations, and then test or validate those explanations

The reason to adopt the descriptive research is due to the type of research question, design,
and data analysis that will be applied to a given topic.

Descriptive statistics tell what is, while inferential statistics try to determine cause and effect.

Descriptive research aims at fact finding & more often is based on surveys .It’s purpose to
describe the present state of affairs of the topic of study.

It is more focused than an exploratory study. It provides basic information for formulating
more sophisticated study.

26
 CHAPTER 4

MAJOR FINDINGS
AND
INTERPRETATION

27
Rural banking in India has been an important area of focus for the government and the
banking sector, as it plays a crucial role in promoting financial inclusion and economic
development in rural areas.

1.The rural banking sector in India has undergone significant reforms in the past few decades,
with the government and the Reserve Bank of India (RBI) taking several measures to
improve access to financial services in rural areas.

2.Despite these efforts, a significant proportion of the rural population still remains unbanked
or underbanked. According to the latest data available from the RBI, only about 30% of rural
households have access to formal banking services.

3.Lack of financial literacy and awareness is one of the major barriers to the adoption of
formal banking services in rural areas. Many people in rural areas still prefer to use informal
financial channels, such as moneylenders and chit funds, due to a lack of understanding of the
benefits of formal banking.

4.The introduction of technology-enabled financial services, such as mobile banking and

digital payments, has the potential to revolutionize the rural banking sector in India.
However, there are still significant challenges to be addressed, such as poor network
connectivity and low levels of digital literacy.

5.The microfinance sector has emerged as an important player in rural banking in India,
providing small loans and other financial services to low-income households and small
businesses. However, there are concerns about the sustainability of the microfinance model
and the potential for over-indebtedness among borrowers.

6.There is a need for greater collaboration and coordination among different stakeholders,
including banks, government agencies, and NGOs, to ensure that rural banking initiatives are
effective and sustainable. This includes efforts to build the capacity of local institutions and
promote community participation in financial decision-making.

Overall, rural banking in India presents both challenges and opportunities for promoting
financial inclusion and economic development in rural areas. By addressing the barriers to
adoption of formal banking services and leveraging technology and innovative business
models, the sector has the potential to drive significant positive change in the lives of rural
communities.

28
ANALYSIS OF DATA

INSTRUMENTS USED IN DATA COLLECTION

The instrument or tool that is used in the data collection of the research study is
QUESTIONNARIE. Questionnaire is the most common method used for primary data
collection by the researchers. It can be used for collecting quantitative or qualitative
information. A questionnaire is defined as a research instrument which consists of certain set
of questions with the aim to collect information from the respondent based on their opinions,
knowledge, attitudes and beliefs. It is a used as a tool to conduct a survey to get the
information of the research problem. The questionnaire used in this research study has been
framed on the basis of the employee’s experience working within the organisations. The data
collected with the help of the questionnaire is based on the recruitment & selection policies
and methods adopted by the company and their impact on the overall employees’
performance. Questionnaire is the most important tool and part of the research study as it
requires every information in detail. The questionnaire used in the study helps in getting the
employee’s true opinion about the company’s recruitment and selection policies and to check
whether these policies are effective or not for the employees as well as for the company itself.
Questionnaire used here forms the basis of the overall study. Now-a-days, Questionnaire is
the mostly commonly used instrument for collecting data. The researcher uses this instrument
for collecting data by framing certain questions for obtaining information from the
respondents

SAMPLING DESIGN SAMPLE

Sample is defined as a smaller set of data that the researcher selects from a large population
by using some pre-defined sampling method. It refers to a smaller, manageable set of large
population. A sample is a subset containing the features of large population.

SAMPLING

Sampling is a statistical tool which is used to indicate how much data to collect and how
often it should be taken. Sampling is a process in which a researcher selects a sample i.e.
smaller size from the whole population to make statistical inferences from it. It is cost-
effective and time convenient method.

29
SAMPLE SIZE

A sample size is define as the number of people/individuals a researcher should include in

while selecting sample which depends on various number of factors like size and variability
of the population and the research design. It refers to the number of respondents included in
the research for collecting data / samples. The sample size of this research study is 80
respondents.

SAMPLE DESIGN:

POPULATION

➢It covers the 100 unit of population.

SAMPLE PROCEDURES

➢In this study convenient sampling method was adopted. First each organization
was divided into different departments like Operations, CustomerServices, Human
Resources, Internet Marketing and under writing departments. From this department,
the respondents were selected on the basis of convenience.

INTERVEIW SCHEDULE

➢ The interview schedule has been used to collect the data. Information can be
gathered even when the respondents happen to be literate or illiterate.

TABULATION

➢ It is the arrangement of classified data in an orderly manner. This involves

creating table for recording the filled in interview schedule. These tables are of
immense help to analysis by using the statistics tools help to analysis by using the
statistical tools.

30
TOOLS USED FOR ANALYSIS

Simple percentage analysis

➢ It is simple analysis tool. In this method, based on the opinions of the respondents,
percentage and bar chart is calculated for the respective scales of each factor.

Formula:
Simple percentage = No. of respondents x 100
Total no. of sample size

SAMPLING METHODS/TECHNIQUES

Types of Sampling Methods

Non Probability Sampling

31
PROBABILITY SAMPLING

Probability sampling is a sampling method where a researcher sets certain

few criteria and selects the respondents from the population randomly. It is
also known as random sampling and in this sampling technique all the
members of the population have equal chance to become partof the sample
as sampling is done randomly.

TYPES OF PROBABILITY SAMPLING

There are four types of probability sampling are as:

• Simple random sampling

• Cluster sampling
• Systematic sampling
• Stratified random sampling

NON — PROBABILITY SAMPLING

Non — Probability Sampling is a sampling method where a researcher
chooses the sample by using his own subjective judgment rather than
selecting individuals randomly. In this method of sampling all the members
of the population are not given equal chance or opportunity to be selected
in the sample size and become a part of the research as well.

32
 TYPES OF NON — PROBABILITY SAMPLING

The four types of non — probability sampling are as:

• Convenience sampling
• Judgmental or Purposive sampling
• Snowball sampling
• Quota sampling

SAMPLING METHOD USED IN THE STUDY

The sampling method that is used in this research study is

CONVENIENCE SAMPLING. Convenience sampling is a type of non
— probability sampling where a researcher selects the sample as per his
ease of collecting the data from the respondents. It is also called grab
sampling or opportunity sampling and here sample is taken from that
portion of the population which is close to hand.

Convenience sampling is the most common sampling method that is used

in almost in every research study, because here every researcher can
collects the data as per his/her convenience. This type of sampling method
is widely used in almost every research.

APPROPRIATE STATISTICAL TOOLS APPLIED FOR DATA

ANALYSIS

DATA ANALYSIS

Data Analysis is the process of systematically applying statistical techniques

to analyze, describeand evaluate the research data. It refers working with data
to get useful Information, which canbe used to take useful decisions. The main
purpose of data analysis is to apply and use statistical tools on research data
to find trends and solution to the problems.

33
 TOOLS/TECHNIQUES FOR DATA ANALYSIS

• Descriptive analysis
• Regression analysis
• Factor analysis
• Time series analysis
• Dispersion analysis

DATA ANALYSIS AND INTERPRETATION

1. Central Scheme to provide Interest Subsidy for the period of

moratorium on loans taken by farmer from economically weaker
sections from schedule banks under the loan scheme of the Indian
Banks Association?

□ To great extent □ To some extent □ To very little extent

34
Interpretation:

From the above data it is evident that among the respondent,

➢ 44% of the respondent of rural bank says that Central Scheme to provide Interest
Subsidy for the period of moratorium on loans taken by farmer from economically
weaker sections from schedule banks under the loan scheme of the Indian Banks
Association to great extend where as none of the respondent of Urban Bank says that
Central Scheme to provide Interest Subsidy for the period of moratorium on loans
taken by farmer from economically weaker sections from schedule banks under the
loan scheme of the Indian Banks Association to great extend.

➢ 26% of the respondent of rural bank says that Central Scheme to provide Interest
Subsidy for the period of moratorium on loans taken by farmer from economically
weaker sections from schedule banks under the loan scheme of the Indian Banks
Association to great extend where as 72% of the respondent of Urban Bank says that
Central Scheme to provide Interest Subsidy for the period of moratorium on loans
taken by farmer from economically weaker sections from schedule banks under the
loan scheme of the Indian Banks Association to some extend.

➢ 10% of the respondent of rural bank says that Central Scheme to provide Interest
Subsidy for the period of moratorium on loans taken by farmer from economically
weaker sections from schedule banks under the loan scheme of the Indian Banks
Association to great extend to very little great extend where as 28% of the respondent
of Urban Bank says that Central Scheme to provide Interest Subsidy for the period of
moratorium on loans taken by farmer from economically weaker sections from
schedule banks under the loan scheme of the Indian Banks Association to very little
extend.

35
Interpretation:

From the above data it is evident that among the respondent,

➢ 90% of the respondent of Rural Bank says that Sales Promotions have been used by
banker to increase sales in the short term where as 59% of the respondent of Urban
Bank says that Sales Promotions have been used by banker to increase sales in the
short term.
➢ 10% of the respondent of rural bank says that Sales Promotions have been used by
banker to increase sales in the short term where as 30% of the respondent of Urban
Bank says that Sales Promotions have been used by banker to increase sales in the
short term.
➢ No respondent of rural bank says that Sales Promotions have been used by banker to
increase sales in the short term is nill where as 11% of the respondent of Urban Bank
says that Sales Promotions have been used by banker to increase sales in the short term
is nill.

36
3.Does your marketing policy of bank have a focus marketing on agro- sector?

□ Strongly agree □ Agree □ Disagree □ Strongly disagree □ Can’t say

37
Interpretation:

From the above data it is evident that among the respondent,

➢ 83% of the respondent of Rural Bank strongly agree that Marketing policy of bank
have a focus marketing on agro- sector where as 61% of the respondent of Urban
Bank also strongly agrees that Marketing policy of bank have a focus marketing on
agro- sector.

➢ 17% of the respondent of Rural Bank agree that Marketing policy of bank have a
focus marketing on agro- sector where as 23% of the respondent of Urban Bank also
agrees that Marketing policy of bank have a focus marketing on agro- sector.

➢ None of the respondent of Rural Bank disagree that Marketing policy of bank have a
focus marketing on agro- sector where as 16% of the respondent of Urban Bank also
disagree that Marketing policy of bank have a focus marketing on agro- sector.

➢ None of the respondent of Rural Bank & Urban Bank also strongly disagree that
Marketing policy of bank have a focus marketing on agro- sector.

➢ None of the respondent of Rural Bank & Urban Bank can’t says that Marketing policy
of bank have a focus marketing on agro- sector.

38
4) Multiple ‘basic’ financial services and loan gateway is product marketing of the bank?
□ Yes □ No

Interpretation:

From the above data it is evident that among the respondent,

➢ 87% of the respondent of Rural Bank says that Multiple ‘ basic’ financial services
and loan gateway is product marketing of the bank where as 62% of the respondent
of Urban Bank also says that Multiple ‘ basic’ financial services and loan gateway is
product marketing of the bank.

➢ 13% of the respondent of Rural Bank sasys that Multiple ‘ basic’ financial services
and loan gateway is product marketing of the bank where as 38% of the respondent
of Urban Bank also says that Multiple ‘ basic’ financial services and loan gateway is
product marketing of the bank.

39
5) Devised to ensure usage as well as profitability Quantity discounts, and ease in payment
modes is pricing marketing of the bank.
□ Yes □ No

Interpretation:

From the above data it is evident that among the respondent,

➢ 11% of the respondent of rural bank says that Devised to ensure usage as well as
profitability Quantity discounts, and ease in payment modes is pricing marketing of the
bank. whereas 13% of the respondent of Urban Bank also says that Devised to ensure
usage as well as profitability Quantity discounts, and ease in payment modes is pricing
marketing of the bank..

➢ 89% of the respondent of rural bank says that Devised to ensure usage as well as
profitability Quantity discounts, and ease in payment modes is pricing marketing of the
bank. whereas 87% of the respondent of Urban Bank also says that Devised to ensure
usage as well as profitability Quantity discounts, and ease in payment modes is pricing
marketing of the bank.

40
6) Comprehensive offering of different services is placement marketing of the bank?

□ Traditional □ Modern

Interpretation:

From the above data it is evident that among the respondent,

➢ 98% of the respondent of rural bank says that Comprehensive offering of different
services is placement marketing of the bank where as 91% of the respondent of Urban
Bank says that Comprehensive offering of different services is placement marketing
of the bank.

➢ 2 % of the respondent of rural bank says that Comprehensive offering of different

services is placement marketing of the bank where as 9% of the respondent of Urban
Bank says that Comprehensive offering of different services is placement marketing
of the bank.

41
 7) Collaborating with NGO’s to development Knowledge marketing of the bank ?
□ Yes □ No

Interpretation:

From the above data it is evident that among the respondent,

➢ 33% of the respondent of RURAL BANK says that Collaborating with NGO’s to
development Knowledge marketing of the bank where as 81% of the respondent of
Urban Bank also says that Collaborating with NGO’s to development Knowledge
marketing of the bank.

➢ 67% of the respondent of RURAL BANK says that Collaborating with NGO’s to
development Knowledge marketing of the bankwhere as 19% of the respondent of
Urban Bank says Collaborating with NGO’s to development Knowledge marketing
of the bank.

42
 CHAPTER 5

CONCLUSION

43
RRBs' performance in respect of some important indicators was certainly better than that of
commercial banks or even cooperatives. RRBs have also performed better in terms of providing
loans to small and retail traders and petty non-farm rural activities. In recent years, they have
taken a leading role in financing Self-Help Groups (SHGs) and other micro-credit institutions
and linking such groups with the formal credit sector.

RRBs should really be strengthened and provided with more resources with which they can
undertake more of these important activities. And most certainly they should be kept apart from
a profit-oriented corporate motivation that would reduce their capacity to provide much needed
financial services to the rural areas, including to agriculture. Ideally, the best use of the
resources raised by RRBs through deposits would be through extensive cross subsidisation.
This, in turn, really requires an apex body that would cover and oversee all the RRBs,
something like a National Rural Bank of India (NRBI).

The number of rural branches should be increased rather than reduced; they should be
encouraged to develop more sophisticated methods of credit delivery to meet the changing
needs of farming; and most of all, there should be greater coordination between district
planning authorities, Panchayati raj institutions and the banks operating in rural areas. Only
then will the RRBs fulfill the promise that is so essential for rural development.

So through this detailed study and project report about RRBs, we learnt about their history,
past performances, present situations as well as probable future scenario. They have
contributed huge to develop rural economy as well as overall Indian economy. So if
amalgamation happens, After the Amalgamation, with the help of computerization, newer and
upgraded technologies, efficiency increases, moreover the rural people who have not availed
the banking service are the prospective customers, all these will give positive results, the
incurred loss will be recovered and the objective for which the Regional Rural Banks are
operating will prove to be a successful one. The Regional Rural Banks are trying hard to
achieve the social objectives which are providing services to the rural mass that are under
privileged. So let’s hope that whatever the Indian government will decide about Regional Rural
Banks, will be fruitful for all, specially for the rural people of our country.

44
 CHAPTER 6

LIMITATIONS

45
LIMITATIONS OF THE STUDY

• The study is focused only in Bajaj Allianz Life Insurance Company.

• Thus the respondents are not come forward to provide their feedback regarding their
organization than the result is bias.

• In this study the sample size is 70. The result might vary when the sample size values
changes it.

• Researcher fined the difficulty in searching the appropriate advisor and respondent
throughout the city.

•
The research was limited to the Bhopal city.

46
ANNEXURE

47
 NAME:

DESIGNATION:

Central Scheme to provide Interest Subsidy for the period of moratorium on loans taken by
farmer from economically weaker sections from schedule banks under the loan scheme of the
Indian Banks Association?
a) To great extent b) To some extent c) To very little extent

To what extent is Sales Promotions have been used by banker to increase sales in the short
term?
a) Completely b) Partially c) Nil

Does your marketing policy of bank have focus marketing on agro-

sector?

a) strongly agree b) Agree c) Disagree d) strongly disagree e) can’t say

Multiple ‘basic’ financial services and loan gateway is product marketing of the bank?
a) Yes b) No

Devised to ensure usage as well as profitability Quantity discounts, and ease in payment modes
is pricing marketing of the bank?
a) Yes b) No

Comprehensive offering of different services is placement marketing of the

bank?
a)Traditional b) Modern

Collaborating with NGOs to development Knowledge marketing of the

bank?

a) Yes b) No

48
BIBLOGRAPHY
AND
REFERNCES
.

49
BIBLIOGRAPHY

Books:

• Aaker (1991) Building Strong Brands; New York: Free Press

• Chatterjee, Jauchius, Kaas and Satpathy no. 1, (2002): 'Revving up auto branding',
McKinsey Quarterly.

• David. A. Aaker, V.Kumar & George S. Day, (2001) Descriptive Research: Marketing
Research, Seventh Edition, pp 17

• Saxena, Rajan. (2003):’Marketing Management’ Tata Mcgraw-Hill Publishing Company

Limited. New Delhi

• Sontakki, C.N. (1997):’Marketing Management’ Kayali Publisher., New Delhi .

• Kotler, Philip. (1999):’Marketing Management’ Prentice Hall Of India Pvt. Ltd., New
Delhi.

• Kothari, C.R (2001):’Research Methodology’, Vishwa Publication., New Delhi

• Sharma,D.D(2002):’Marketing Research’,Sultan Chand Sons, New Delhi

Magazines:

• Business Today

• Business Week.

• Business World

Newspapers

• Economic Times

• The Hindu

• Times of India

50
PLAGIARISM REPORT

51
52
53
54
55