A SYNOPSIS ON

“COMPARATIVE STUDY ON REGIONAL

RURAL BANKING”
AT
“TELENGANA GRAMEENA BANK LIMITED”
BY
RUDRAVARMA PRIYANKA
(HALL TICKET NO: 2129-21-672-037)
Synopsis for project to be submitted for the award
of the degree of
MASTER OF BUSINESS ADMINISTRATION
OSMANIA UNIVERSITY
2021-2023

AURORA’PG COLLEGE, NAMPALLY

1
 INTRODUCTION

Regional Rural Banks (RRBs) are government owned scheduled commercial banks of India

that operate at regional level in different states of India. These banks are under

the ownership of Ministry of Finance , Government of India. They were created to serve rural

areas with basic banking and financial services. However, RRBs also have urban branches.

The area of operation is limited to the area notified by the government of India covering, and

it covers one or more districts in the State. RRBs perform various functions such as providing

banking facilities to rural and semi-urban areas, carrying out government operations like

disbursement of wages of MGNREGA workers and distribution of pensions, providing para-

banking facilities like locker facilities, debit and credit cards, mobile banking, internet

banking, and UPI services.

Regional Rural Banks were established under the provisions of an ordinance passed on 26

September 1975 and the RRB Act 1976 to provide sufficient banking and credit facility for

agriculture and other rural sectors. As a result, five RRBs were set up on 2 October 1975 on

the recommendations of the Narsimhan Committee on Rural Credit, during the tenure

of Indira Gandhi's government. The purpose was to include rural areas into the economic

mainstream since around 70% of the Indian population was rural.

Prathama Bank, with head office in Moradabad, Uttar Pradesh was the first RRB. It was

sponsored by Syndicate Bank and had an authorised capital of Rs. 5 crore.[2] The other four

RRBs were Gaur Gramin Bank (sponsored by UCO Bank), Gorakhpur Kshetriya Gramin

Bank (sponsored by State Bank of India), Haryana Kshetriya Gramin Bank (sponsored

by Punjab National Bank), and Jaipur-Nagaur Anchalik Gramin Bank (sponsored by UCO

Bank).

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The RRBs were owned by the central government, state government, and the sponsoring

bank with 50%, 15%, and 35% shareholding respectively.

Recapitalization

A review of the RRBs in August 2009 by the Union Finance Minister revealed that a large

number of RRBs had a low Capital to Risk weighted Assets Ratio (CRAR). A committee was

constituted in September 2009 under the chairmanship of K C Chakrabarty,[4] the deputy

governor of the Reserve Bank of India (RBI) to analyse the financials of the RRBs and

suggest measures, including re-capitalisation to bring the CRAR of RRBs to at least 9% in a

sustainable manner by 2012. The committee submitted its report in May 2010.[5][6]

The committee recommended RRBs to have a CRAR of at least 7% on 31 March 2011 and at

least 9% from 31 March 2012 onwards. The recapitalization requirement of Rs 2,200.00 crore

for 40 of the 82 RRBs were to be released in two installments in 2010–11 and 2011–12. The

remaining 42 RRBs will not require any capital and will be able to maintain CRAR of at least

9% as of 31 March 2012 and thereafter, on their own. A fund of ₹100 crore to be set up for

training and capacity building of the RRB staff.

The Government of India approved the recapitalization of the RRBs to improve their CRAR

in the following manner:

 Share of central government, that is, ₹1,100 crore will be released as per provisions made

by the Department of Expenditure in 2010-11 and 2011–12. However, release of the

funds will be contingent on proportionate release of the state government and sponsor

bank share.[5]

 A capacity building fund with a corpus of ₹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
3
 reviewed by the central government. An action plan will be prepared by NABARD and

sent to the government for approval.

 An additional amount of ₹700 crore was set up as a contingency fund to meet the

requirement of the weak RRBs, particularly those in the north-eastern and the eastern

region.

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NATURE OF STUDY AND AIMS

A Regional Rural Bank is sponsored by a commercial bank. For this purpose, the sponsor
bank requests the Central Government, which issues a notification after consulting the
concerned State Government. Normally, a RRB covers one district but it is also permitted to
open its branches in other districts. So far the maximum coverage has been eight districts, as
in the case of Telangana Regional Rural Bank which covers the entire State of Telangana.

STATEMENT OF PROBLEM
Despite the important role played by RRBs in providing credit to the weaker sections of
society in rural areas, they are faced with serious problems which have led critics to question
their very existence. The Dantwala Committee (1978), the Kelkar Committee (1986) and the
Khusro Committee (1989) have pointed towards some of the weaknesses in the working of
RRBs which are as follows:

1. Haphazard Branch Expansion:

A large network of branches has been opened at a fast pace which has not contributed to
substantial increase in business. It has added to overhead costs without contributing to profits.
Moreover, major variations persist among States in the coverage of districts/ branches by the
RRBs. In some States, backward areas still remain uncovered by these banks.

In many districts, the RRBs do not have link branches at the Taluka/ Block headquarters for
meeting the cash requirements and to overcome other operational problems. In some of the
places where branches are essential, it is difficult to get suitable accommodation for housing
the branches.

2. Defective Recruitment Policy:

Being rural oriented, the RRBs are expected to recruit staff locally. With the transfer of
recruitments in RRBs to the Banking Service Recruitment Boards, the candidates outside the
area of operations of RRBs are also made eligible for recruitment into RRBs. This is against
the concept of RRBs where the local feel and familiarity’ of the staff is essential for the
successful working of the RRBs.

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3. Rigid Norms:
The norms laid down for the selection of beneficiaries in RRBs are rigid and based on an all
India income level. The poverty line available in Haryana is not the poverty line obtained in
Andhra Pradesh. The village, its people, their occupations and economic status differ widely
in Andhra Pradesh with that of All India average. But to apply the same norms to all the
States leave out many persons who are in need of credit from the RRBs.

4. Weak Capital Base:

The capital base of each RRB is weak. Initially, the issued capital was Rs.50 lakh which has
been raised to Rs.75 lakh and Rs.1 crore in the case of selected RRBs. But the State
Governments failed to contribute their share. In view of its enormous credit obligation in
rural areas, this limit is on the lower side. The working of many RRBs reveals that they have
eroded their capital base on account of continuous losses.

5. Constraints in Deposit Mobilisation:

As the RRBs supply credit only to the weaker sections of the rural population, they have been
unable to mobilise sufficient deposits. The weaker sections who are the main beneficiaries are
poor and do not save so much as to deposit in the RRBs. The middle classes and the rural
elite are not interested to deposit their saving in the RRBs. They deposit them in commercial
banks from whom they get credit facilities.

6. Erosion of Profitability:
The RRBs have not been able to operate on a viable basis. The major factors which have
contributed to the erosion of their profitability have been their lending exclusively to the
weaker sections, low interest margins and high operating cost involved in handling small
loans. During 1999-2000 there were 33 loss making RRBs which incurred a net loss of
Rs.109 crores.

7. Poor Recoveries:
The recover of loans due has been very poor. The estimate of the Khusro Committee revealed
that as on June 1986, the recovery of RRBs was 49 per cent. During 1999, the recovery level
was below 30 per cent. The main factors have been willful defaults, misuse of loans, lack of
follow-up, wrong identification of borrowers, extension of benami loans, staff agitations, etc.

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8. Defective Credit Deployment:
In many districts, the credit deployment has not been proper., The loaning activities are
mainly confined to crop loans and the schemes sponsored by the State Governments. The
schematic approach towards lending is lacking in many cases.

Activities allied to agriculture, cottage and rural industries, rural artisans/craftsmen and other
self-employed programmes have not been given due importance in the loaning activities of
the RRBs.

9. High Loan Transaction Cost:

With parity in pay scales between the RRBs and commercial banks, the loan transaction costs
in RRBs are many times higher than in rural branches of commercial banks.

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NEED FOR THE STUDY
 To know what number of clients are using electronic keeping money .
 To survey the operation of electronic keeping money by the respondents of test banks.
 To distinguish the issues of test banks ‘clients while working e-managing an account
in the present study and on the premise of discoveries made, offer some workable
recommendation to better the administrations offered by the India saving money
framework.
 Reduce rural and urban gap by mobilizing financial resources and services to rural
regions.
 Regional Rural Banks pave the way for inclusion of the marginal population like
small farmers, Below Poverty Line (BPL) farmers and workers, small entrepreneurs,
artisans, women, etc.
 Regional Rural Banks assist rural businesses by providing them short- term loans,
insurance facilities, etc., and help to improve the role of entrepreneurship in rural
areas.
 Providing assistance like loans, advances, insurance to agriculturists for farming
inputs, equipment, processing, marketing activities, and cooperative societies helps in
the growth of agriculture and the advancement of farmers.
 Many public and private sector banks do not deal with farmers and rural section due
to their small financial needs, fewer incomes, etc. In such a case, there is a need for a
separate banking system to protect the interests of these sectors.
 The RRBs look forward to covering underserved rural areas in terms of financial
services and extending credit assistance.
 Help in the growth of cooperative societies, agricultural societies, etc.
 RRBs reduce farmers’ and the weaker sections’ dependence on traditional
sources like moneylenders who exploited them with a high rate of interests on loans.

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SCOPE OF THE STUDY
People used information technological tools to manage and process the information.
atomization process use in the finical sector for transaction system.

 The study mainly involves the financial performance of Rural Banking in

TELENGANA GRAMEENA BANK before and after amalgamation.
 In this study, we get to know the challenges faced by the banking in rural areas.
 To provide loan facilities to Cooperative societies, which are engaged on services
related to rural area including agriculture activities. Providing banking services to
individuals living in rural areas.
 The study involves how TELENGANA GRAMEENA BANK came into existence for
providing the credit facilities to the small and marginal farmers, and small
entrepreneurs for the agricultural, trade, and other productive activities.
 Increasing in the purchasing power
 India has 200 million households and 400 million middleclass population
 Nuclear family concept is gaining much importance

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OBJECTIVE OF THE STUDY
1. To grant loans and advances to the weaker sections of the rural population, especially to
the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs who
are engaged in agriculture, trade, commerce, industry and other productive activities.

2. To grant loans and advances to cooperative societies, including marketing societies,

agricultural processing societies, cooperative farming societies, primary agricultural credit
societies or farmers’ service societies for agricultural purposes.

3. To take banking services to the doorsteps of the rural masses, particularly in hitherto
unbanked rural areas.

4. To mobilise rural savings by accepting deposits and channelize them for productive
activities in the rural areas.

5. To create supplementary channel for flow of credit from the urban money market to the
rural areas through refinance.

6. To generate employment opportunities in rural areas.

7. To bring down the cost of supplying credit in rural areas.

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RESEARCH METHODOLOGY
The data collection methods include both the primary and secondary collection
methods.

● PRIMARY DATA

This method includes the data collected from the personal discussions with the
authorized clerks and members of the exchange.

● SECONDARY DATA

Secondary data refers to those data that has already been collected and analysed by
someone else.In other words secondary data is the information that already exist
somewhere having been collected for another purpose.

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LIMITATION OF THE STUDY
1. The usage of rural banking in rural area is all set to increase amon e service class.
2. The service class at the moment is not using the services thoroughly due to various
hurdling factors like insecurity and fear of hidden costs etc.
3. So banks should come forward with measures to reduce the apprehensions of their
customers through campaigns and more meaningful advertisements to make E-
banking in rural area popular among all the age and income groups.
4. Further, with increasing consumer demands, banks have to constantly think of
innovative customized services to remain competitive.
5. E-banking in rural area is an innovative tool that is fast becoming a necessity.
6. It is a successful awareness strategic weapon for banks to remain profitable in a
volatile and competitive marketplace of today.

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 THEORETICAL REVIEW

o The Regional Rural Banks (RRBs) were established in 1975 under the provisions of the
Ordinance promulgated on 26th September 1975 and Regional Rural Banks Act, 1976.

o RRBs are financial institutions which ensure adequate credit for agriculture and other rural
sectors.

o 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.

o After the reforms in the 1990s, the government in 2005-06 initiated a consolidation
program that resulted in the number of RRBs declining from 196 in 2005 to 43 in FY21, and
30 of the 43 RRBs reported net profits.

 Functions:

The basic functions of a bank can be summarized as follows:

 To provide safety to the savings of customers

 To create credit and increase the supply of money

 To encourage public confidence in the financial system

 To mobilize the savings of public

 To increase its network so as to reach every segment of the society

 To provide financial services to all customers irrespective of their level

of income

 To bring in social equity by providing financial services to every

stratum of society.
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What are the Issues Related to RRBs?

 Rising Cost: The rising cost of operations of Regional Rural Banks (RRBs) as
compared to scheduled commercial banks.

o The government wants them to work towards increasing their earnings.

 Limited Activities: Due to the fact that many of these branches don't have enough
business, they are incurring losses.

o In rural areas, they mainly offer government schemes like Direct Benefit
ransfer.

 Low Internet Banking: At present only 19 RRBs have internet banking facilities and
37 have mobile banking licenses.

o Existing regulations allow only those RRBs to offer internet banking which
maintains minimum statutory capital to risk-weighted assets ratio (CRAR) of more than 10%.

What are the Suggestions by the Government?

 It has asked RRBs to 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.

o So that they become financially sustainable

 It urged the sponsor banks to formulate a clear roadmap in a time-bound manner to

further strengthen the RRBs and support the post-pandemic economic recovery and

o Also, suggested conducting a workshop on RRBs and sharing the best practices
with each other.

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How are RRBs being Reformed by the Government?

 Over the years, various steps have been taken by the government to increase the
contribution of people to the financial system of India.

o In 1969, a major renovation in the banking sector took place with

the Nationalization of all the Banks existing in India. In the year 1981, the National Bank for
Agriculture and Rural Development (NABARD) was established.

 The main aim of establishing NABARD was to promote sustainable

and impartial agriculture and enhance rural prosperity through effective credit support, related
services, institution development, and other innovative initiatives.

 Hence, the National Bank for Agriculture and Rural Development (Nabard) will
spearhead the initiative to revive the RRBs.

o Further, the development bank is already working on a roadmap for 22 RRBs

which is expected to be implemented by the end of this year.

 The plan also included merging branches of these RRBs with sponsor
banks once these branches reach a certain level of business.

o Last year, the government set up a panel with members drawn from Nabard
and the RBI to give recommendations for strengthening the regional lenders.

 The government has contributed RS 4,084 crores towards RRB

recapitalization in 2021-22, of which Rs. 3,197 crores has been released to 21 lenders. focus
on financial inclusion by leveraging technology

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 2.2 REVIEW OF LITERATURE

Article 1: Distinctive demand and risk characteristics of residential housing loan market in

India

Author: Arindam Bandyopadhya and AsishSaha

Journal: Journal of Economic Studies, vol. 38 no. 6

Published Date: 1 November 2011

Abstract:

The primary objective of the paper is to demonstrate the importance of borrower‐specific

characteristics as well as local situation factors in determining the demand prospect as well as

the risk of credit loss on residential housing loan repayment behavior in India. Using 13,487

housing loan accounts (sanctioned from 2093-2007) data from Banks and Housing Finance

Cos (HFCs) in India, this paper attempts to find out the crucial factors that drive demand for

housing and its correlation with borrower characteristics using a panel regression method.

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Article 2: Formal housing finance outreach and the urban poor in India

Author: Kiran Sandhu

Journal: International Journal of Housing Markets and Analysis, vol. 6 no. 3

Published Date: 26 July 2013

Abstract:

Access to housing remains high on the agenda of the governments in the developing

countries. One of the responses to low income housing access is by making the housing

finance conduits reachable to the poor. Based upon a comprehensive review of literature in

terms of work of other authors, reports and documents, the paper generates evidence and

critically examines the context of housing finance provision for the urban poor in India.

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Article 3: Housing attributes affecting buyers in India, Analysis of perceptions in the context

of EWS/LIG consumers view.

Author: Pavan Namdeo, Ghumare, Krupesh, A. Chauhan and Sanjay Kumar M. Yadav

Journal: International Journal of Housing Markets and Analysis

Published Date: 18 November 2020

Abstract:

The purpose of this paper is to provide affordable housing to low- and middle-income groups.

The gravity of India’s housing affordability problem has led us to study and analyse the

attributes hindering affordable housing for economically weaker section (EWS) and low-

income group (LIG). The judgment sampling is used among housing and planning

professionals working in five different sectors, including local authorities, housing

developers, housing sectors, town planning and property/affordable housing consultant.

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Article 4: Operational guidelines for sustainable housing micro‐finance in India

Author: T.S. Anand Kumar, V. PraseedaSanu and Jeyanth K. Newport

Journal: International Journal of Housing Markets and Analysis, vol. 1 no. 4

Published Date: 21 November 2008

Abstract:

Housing microfinance is emerging globally as an important financial activity to help alleviate

the housing needs of economically vulnerable people. Micro‐finance institutions (MFIs)

planning to include housing product must carefully assess whether they have the management

and technical capacity to do so. It finds that MFIs should also ensure that housing micro‐

finance suits their strategy from institutional and financial perspectives.

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Article 5: A study on the mediating effect of residential loans in India

Author: Tanu Aggarwal and Priya Solomon

Journal: Journal of Property Investment & Finance, vol. 37 no. 5

Published Date: 5 August 2020

Abstract:

The residential loans as a mediator have been used to know the mediation effect between

commercial and total real estate loans of banks in India. The residential loans as a mediator

govern the relationship between commercial loans and total real estate loans in India. Real

estate sector development is a lucrative opportunity for India. The real estate sector plays a

major role in shaping economic conditions of the individuals, firms and family. The outcome

of the structural model that is bootstrapping technique shows that there is an impact of

residential and commercial loans by public and private sector banks on total real estate sector

development in India.

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Article 6: Current Challenges for Personal loanin India

Author: Neeta Maheshwari, Rajeev Biyani

Journal: Indian journal of finance vol 5

Published Date: 3 March 2011

Abstract:

The major objective of this paper is to provide crucial information for getting Personal

loanfor housing in our country and improve the living standard of communities. This task is

very important in several aspects, for example, it sheds light on the issue of affordability of a

house as a major aspect of the overall poverty problem and ways to combat it; and, it enables

us to stress on the importance of the need for more flexible lending practices among banks.

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Article 7: Housing Finance Snags Faced by Indian Home Loan Mortgagors

Author: D. Srinivasa Kumar

Journal: Indian journal of finance vol 11

Published Date: 11November 2018

Abstract:

Housing is an essential need in each economy and it is a fundamental pointer for the financial

improvement of the nation. This study distinguished the problems faced by home loan

borrowers from the application stage to the last stage of loan repayment and examined how

their socio - financial profile impacted their perceptions of the problems faced by them while

availing home loans. This paper revealed that the salaried class faced problems like the

documents needed for screening, rate of interest, and time gap between loan applied and

sanctioned.

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Article 8: Home Loan Portfolio

Author: Patnaik B.C.M

Journal: International Journal of Current Advanced Research Vol 6,

Published Date: 28September, 2018

Abstract:

The present paper is an initiative to understand the various dynamics related to home loan

portfolio and to undertake empirical study related to home loan. In this regard secondary data

is considered. The various variables identified are financial basics are behind drop in home

cost, interest rate plays an important role, paper work, decrease in profitability,

awareness among the prospective customers, poor are not getting the budgetary help, re-

arrangement of housing policy of government, service quality, speed of providing services

and implementations of schemes should match the economic profile of the borrowers

Article 9: An Empirical Analysis of the Demand for Personal loanin Urban India

Author: Archana Fulwari, Jayant Kumar

Journal: journal of economics and research vol 5

Published Date: 2 April 2017

Abstract:

Housing aspirations of households in India have been on a rise, particularly in the post

reforms period, and the role of Personal loanin meeting these needs cannot be

overemphasized. The entry of private financial institutions and banks in a big way after the

introduction of economic reforms in India and their aggressive posturing have added further

fuel to the demand for housing. The post reforms period has witnessed higher personal

disposable incomes, lower inflation rates, lower interest rate regime, and an increased thrust

on retail lending by the financial institutions, contributing to the expansion of the housing

finance sector.

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Article 10: Housing Finance in India and Appraisal Process of Personal loanwith Specific

Reference to Indian Overseas Bank

Author: Souvik Ghosh

Journal: International Journal of Science and Research

Published Date: 8 August 2015

Abstract:

Owning a home is one of life’s biggest aspirations of a person. Personal loanare the most

easily accessible financial Supplement to purchase a person’s dream home..Once the

maximum amount to put into the property has been decided, the Housing Finance Institutions

or Banks will let the customer know that how much he/she is eligible for and this helps to

plan out the budget. Each HFC has its own norms and standard to evaluate borrower’s ability

to repay the loan and the credit worth of costumer eligible.

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INDUSTRY PROFILE

A bank is a financial institution that accepts deposits and channels those deposits

into lending activities. Banks primarily provide financial services to customers while

enriching investors. Government restrictions on financial activities by banks vary

over time and location. Banks are important players in financial markets and offer

services such as investment funds and loans. In some countries such as Germany,

banks have historically owned major stakes in industrial corporations while in other

countries such as the United States banks are prohibited from owning non-financial

companies. In Japan, banks are usually the nexus of a cross-shareholding entity

known as the keiretsu. In France, banc assurance is prevalent, as most banks offer

insurance services (and now real estate services) to their clients.

Introduction

India’s banking sector is constantly growing. Since the turn of the century, there has

been a noticeable upsurge in transactions through ATMs, and also internet and

mobile banking.

Following the passing of the Banking Laws (Amendment) Bill by the Indian

Parliament in 2018, the landscape of the banking industry began to change. The bill

allows the Reserve Bank of India (RBI) to make final guidelines on issuing new

licenses, which could lead to a bigger number of banks in the country. Some banks

have already received licences from the government, and the RBI's new norms will

provide incentives to banks to spot bad loans and take requisite action to keep rogue

borrowers in check.

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 COMPANY PROFILE

Telangana Grameena Bank has the potential to become a prominent regional

rural bank. India’s depository banking institution sponsors this bank. It
operates in 18 districts across the state and is regarded as one of the most
sophisticated banks in the industry. The bank was formed by combining four
RRBs sponsored by a banking firm in Hyderabad, namely Sri Saraswathi
Grameena Bank in Adilabad, Sri Satavahana Grameena Bank Karimnagar, Sri
Rama Grameena Bank in Nizamabad, and Golconda Grameena Bank in Ranga
Reddy (Hyderabad). So if you’re looking for Telangana Grameena Bank
Customer Care Balance Enquiry, you’ve come to the right spot.

Telangana Grameena Bank Offerings

Telangana Grameena Bank offers various kinds of loans such as:

 Car Loan
 Personal Loan
 Gold Loan
 Home Loan

Telangana Grameena Bank offers various kinds of banking such as:

 Net Banking
 Customer Care
 Balance Enquiry

Telangana Grameena Bank offers two kinds of Deposit Accounts such as:

 Savings Account
 Current Account

Telangana Grameena Bank Loans Offered

 Car Loan– The bank offers a wide range of business services and is very
recognised and trustworthy. A used vehicle loan is a type of auto loan that is
used to purchase and finance a used or pre-owned car.
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 Personal Loan– The Telangana Grameena Bank Personal Loan is provided to
salaried and self-employed persons with repayment capacity at a 10.70%
yearly interest rate.
 Gold Loan– The Telangana Grameena Bank, founded in 1983, is a rural bank
in Telangana that is supported by the State Bank of India (State bank of India).
This bank is available in all of Telangana’s districts. The purpose of this bank
is to provide financial assistance to the country’s common inhabitants. This
bank offers a variety of services, including personal loans, gold loans, and
home loans.
 Home Loan– Qualified Non-Resident Indian Borrowers can get NRI home
loans from Telangana Grameena Bank at a fixed interest rate beginning at 6.80
per cent. Female borrowers are eligible for special interest rate reductions.
With variable interest rates, there are no prepayment penalties.

Telangana Grameena Bank Gold Loan

Gold Loan is an unsecured service in which the applicant deposits gold

jewellery in the bank in exchange for the loan amount. The Gold Loan service
is well-known since the paperwork required for this service are minimal. In
addition, when compared to other lending services, the Gold Loan Interest
Rate is relatively low.

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