CAPSTONE PROJECT cu ae ON REPORT - Il 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. Parveen Kumar Abrol Name: Anamika Sankhwar Designation: Assistant Professor UID: 21MBA1646 CHANDIGARH UNIVERSITY, GHARUAN, MOHALI BATCH 2021-2023LITERATURE REVIEW The literature available in the working and performance of RRBs in India is a little limited. The literature obtained by investigators in the form of reports of various committees, commissions and working groups established by the Union Government, NABARD and Reserve Bank of India, the research studies, articles of researchers, bank officials, economists and the comments of economic analysts and news is briefly reviewed in this part. NABARD (1986) published “A study on RRBs viability”, which was conducted by Agriculture Finance Corporation in 1986 on behalf of NABARD. ‘The study revealed that viability of RRBs was essentially dependent upon the fund management strategy, margin between resources mobility and their deployment and on the control exercised on current and future costs with advances. The proportion of the establishment costs to total cost and expansion of branches were the ctitical factors, which affected their viability. The study further concluded that RRBs incurred losses due to defects in their systems as such, there was need to rectify these and make them viable. The main suggestions of the study included improvement in the infrastructure facilities and opening of branches by commercial banks were already in function, Naidu, L-K. (1998) conducted a study on RRBs taking a sample of 48 beneficiaries of rural artisans in Cuddapah district of Andhra Pradesh under Rayale Seen Gramin Bank. In this study, it was concluded that the beneficiaries were able to find an increase in their income because of the finance provided by the bank. Kalkundrickars (1990) in his study on “Performance and Growth of regional Rural Banks in Kamataka” found that these banks had benefited the beneficiaries in raising their income, productivity, employment and use of modern practices and rehabilitate rural artisans. Kumar Raj (1993) carried out a study on the topic “Growth and Performance of RRBs in Haryana”. On the basis of the study of RRBs of Haryana, it is found that there was an enormous increase in deposits and outstanding advances. The researcher felt the need to increase the share capital and to ensure efficient us of distribution channels of finance to beneficiaries. A. K. Jai Prakash (1996) conducted a study with the objective of analysing the role of RRBs in Economic Development and revealed that RRBs have been playing a vital role in the field of rural development. Moreover, RRBs were mote efficient in disbursal of loans to the rural borrowers as compared to the commercial banks. Support from the state Governments, local participation, and proper supervision of loans and opening urban branches were some steps recommended to make RRBs further efficient, L.K Naidu (1998) conducted a study on RRBs taking a sample of 48 beneficiaries of rural artisans in Cuddapah district of Andhra Pradesh state under Rayale Seen Gramin Bank. In this study, it was concluded that the beneficiaries were able to find an increase in their income because of the finance provided by the bank. According to Nathan, Swami (2002), policies of current phase of financial liberalization have had an immediate, direct and dramatic effect on rural credit, There has been a contraction in rural banking in general and in priority sector ending and preferential lending to the poor in particular. Chavan and Pallavi (2004) have examined the growth and regional distribution of rural banking over the period 1975-2002. Chavan’s paper documents the gains made by historical underprivileged region of east, northeast and central part of India during the period of social and development banking. These gains were reversed in the 1990s: cutbacks in rural branches in rural credit deposits ratios were the steepest in the eastern and northeastem states of India, Policies of financial liberalization have unmistakably worsened regional inequalities in rural banking in India, Professor Dilip Khankhoje and Dr. Milind Sathye (2008) have analyzed to measure the variation in the performance in terms of productive efficiency such areas where RRBSOBJECTIVES beter Me lage) Otel lel et cl Me een ise matt anos cert ce Healthy Beau ea) frre rege ‘The importance of the rural banking in the economic development of @ 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 instrance, linkage with other government bodies especially with the food corporation of India, in termsof its procurement functions in rural areas, its terms of borrowing, ete. ‘The Commission also envisaged that all financial needs of the medium and small farmers should be met by the rural banks 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 leaming 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 bs 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. Ithas 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, Ithad a positive effect on income and employment especially after the green revolution.© 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 inculeated 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. 5. Cooperative credit societies in rural areas should be strengthened and their working should be ‘made transparent and efficient. + Conclusion: CSP provider companies have gained a prominent place in the rural banking milieu of India, They are helping to spread the reach of banking services like never before. You cannot ignore their presence and they are indeed the future of the rural banking sector of IndiaANNEXURE(Questionnaire) NAME: AGE: DESIGNATION: 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? 10 To great extent «i To some extent 4 To very little extent 2. To what extent is Sales Promotions have been used by banker to increase sales in the short term? 0 Completely o Partially a Nil 3, Does your marketing policy of bank have focus marketing on agro- sector? strongly agree a Agree a Disagree a strongly disagree 0 can’t say 4, Multiple ‘basic’ financial services and loan gateway is product marketing of the bank? aYeso 5. Devised to ensure usage as well as profitability Quantity discounts, and ease in payment modes is pricing marketing of the bank? 10 Yes o No ‘6.Comprehensive offering of different services is placement marketing of the bank? ‘Traditional «| Modern 7. Collaborating with NGOs to development Knowledge marketing of the bank? 0 Yes a No