Growth and Development of

Regional Rural Banks: CASE

STUDY of Two Major RRBs

SUBMITTED TO
Prof S P Garg
Jaipuria Institute of Management
Jaipur (India)
 Introduction
 Regional Rural Banks were established under the provisions of an Ordinance promulgated on
the 26th September 1975 and the RRB Act, 1976 with an objective ensure sufficient
institutional credit for agriculture and other rural sectors

 Area of operation.
. RRBs are jointly owned by GoI, the concerned State Government and Sponsor Banks (27
scheduled commercial banks and one State Cooperative Bank); the issued capital of a RRB is
shared by the owners in the proportion of 50%, 15% and 35% .

SBI has 30 Regional Rural Banks in India known as RRBs .
 SBIs Regional Rural Banks in India branches is 2349 (16%). Till date in rural banking
in India, there are 14,475 rural banks in the country of which 2126 (91%) are located
in remote rural areas.
 Banks apart from SBI
 Haryana State Cooperative Apex Bank Limited.

 NABARD.

 Sindhanur Urban Souharda Co-operative Bank.


United Bank of India.
 Reform Process
District Coverage –
 RRBs covered 525 out of 605 districts as on 31 March 2006.

 After amalgamation, RRBs have become quite large covering most parts of
the State in many cases.

 Assam Gramin Vikas Bank, an amalgamated RRB, covers 25 districts, the

highest in the country, while five other amalgamated RRBs cover 10 or
more districts each.

 However, 40 RRBs covered two districts and 16 RRBs covered a single

district each in 2005-06.

 Increased coverage of districts by RRBs makes them an important segment

of the Rural Financial Institutions (RFI) for financial inclusion. 
Branch Network
 The number of branches of RRBs increased to 14,494 as on 31 March 2006 from
13,920 branches as on 31 March 1989.

 The network of the 45 amalgamated RRBs (as on April 2007) was quite large and
diverse varying from 85 to 680 branches.

 The Uttar Bihar KGB, an amalgamated RRB, has 680 branches, followed by Baroda
Eastern UPGB with 539 branches.

 The branch network of stand-alone RRBs varied between 8 and 242 as on 31 March
2006. 
RRB's Potential Role in Financial Inclusion-
 Post-merger RRBs represent a powerful instrument for financial
inclusion
 . Their outreach vis-à-vis other scheduled commercial banks
particularly in regions and across population groups facing the brunt
of financial exclusion is impressive, as observed from an analysis of
Basic Statistical Returns of the RBI.

 With merger infusing the much needed financial strength in RRBs

coupled with the local feel and familiarity they command, RRBs are
in a unique position to play a decisive role in financial inclusion
 RRBs as Self Help Promotion Institutions (SHPI)-

 RRBs have not only provided financial services to the SHG-Bank Linkage
Programe, but have also played a significant role as SHPIs.

 . As many as 104 RRBs (31 March 2006) are also functioning as SHPIs with
grant assistance from NABARD .

 RRBs were originally created to cater to neglected sections / areas as they

were expected to have sound financial management combined with local
feel and familiarity.

 With the amalgamation of RRBs, they have acquired the critical mass in
terms of financial strength to widen and deepen their outreach.
 Two Major regional rural banks are:

o ANDHRA PRAGATI GRAMIN BANK (Sponsored by syndicate bank)

o ASSAM GRAMIN VIKASH BANK (Sponsored by united bank of india)

 ANDHRA PRAGATI GRAMIN BANK

 Established under Regional Rural Bank Act, 1976; Sponsored by Syndicate Bank, Owned by
Government of India, Government of Andhra Pradesh And Syndicate Bank.

 Established on 1st June, 2006 after amalgamation of 3 RRBs

 Rayalaseema Grameena Bank (established on 06.08.1976),

 Sree Anantha Grameena Bank (established on 01.11.1979) and

 Pinakini Grameena Bank (established on 11.6.1982).

 The bank is assisting the SHGs in a massive way and financed to more than 97907 SHGs with
outstanding SHG advances of Rs. 693.23 crores.

 The Bank is improving customer service by computerising all its branches.

 The bank has been propagating innovations in Rural Banking and also has been receptive to
new ideas.

 The Government of Andhra Pradesh awarded 'BESTBANK’ award on 17.1.07 .
 FUTURE PLANS
 The Bank is aiming to cross the following mile-stones in the present year (2009-10).
1. Achieve a business level of Rs.7500 crores.

2. Planning to open 10 more branches during the current year in the in the area of operation of the
bank in tune with the policy of Govt. of India.

3. Aiming to convert to CBS platform from TBM for online facility and also for introduction of
ATMs to provide the best customer service.

4. Extending FCNR (B) facility to the customers under AD-ii category.

5. Planning to enter into Government Agency transactions during the current financial year.
 ASSAM GRAMIN VIKASH BANK
 Assam Gramin Vikash Bank was formally launched on the 16th of January 2006.

 It is an amalgamation of Pragjyotish Gaonlia Bank, Lakhimi Gaonlia Bank, Cachar Gramin

Bank and Subansiri Gaonlia Bank, all sponsored by United Bank of India.

 Head Office at Guwahati.

 Better customer service from better infrastructure, branch computerization, pool of

experienced work force, unified publicity and marketing efforts.

 Reaping economies of scale with larger area of operation, enhanced credit exposer limits.

 Opportunities for diverse banking activities, leading to higher business growth.

 
 SPECIAL (CUSTOMISED) SCHEMES

 Lakhpati Deposit Scheme.

 Re-investment Plan Certificate

 Asomi Siddhidata Scheme

 Asomi Flexi Deposit Scheme

 Asomi Tax Savers Term Deposit Scheme

 SUCCESS STORY

 Innovative scheme for pisciculture - financed by lakhimi gaonlia bank.

 Dairy development with venture capital fund - financed by lakhimi gaonlia bank.

 Financing health care units by - lakhimi gaonlia bank.

 Joint liability group financing by - lakhimi gaonlia bank.

 Conclusion
 The reforms of the RRBs were no different from the reforms of the commercial banks.

 The RRBs started aping the commercial banks in their activities – banks relocated to
more promising areas; investments in government securities and PSU bonds and
debentures increased .

 Interest rates of banks on lending were deregulated which resulted in high interest
rates charged by the RRBs.

 Credit to deposit ratio became less than half of the pre-reform levels indicating
increased net transfer of resources from the rural poor to the urban rich

 Regional imbalances aggravated; and the small borrowers, the principal clients of the
RRBs were overwhelmingly sidelined.
 The formation of zonal and state RRBs by merging the various RRBs would be a
welcome move .

 The United Bank of India merging its RRBs in West Bengal and Assam .

 The merger of Chikmagalur Kodagu Grameena Bank – a RRB, with its parent
Corporation Bank

 liberate the RRBs from the overlordship of the sponsor commercial banks, ensure
that the majority ownership of the RRBs remain under state control, set up
independent governance structure(s) for the RRBs and restore functional autonomy
to these banks

 The purpose of the ownership reform of the RRBs must be the same as for
the other aspects of RRB policy: to foster a bank-led equitable rural growth.