FMBO PPT

on
Rural bank
MADE BY-
CHIRAG S. PATIL ROLL NO.- F 20
MANAL SHREYAM ROLL NO.-F 31
 Meaning of Rural Bank
 Rural banks in India are schedule commercial banks that conduct banking
activities at rural areas of a state.

 Unlike banks located in more populous urban areas, rural banks may have
relatively small and specialized customer bases spread over a far greater
geographical area.
 Examples include banks with an agricultural focus or those serving a small
rural community.

 Rural banking traditionally has serviced the financial needs of people

living in remote areas.
 Objectives
 To provide loan for backward class public
 To opening branches of bank in rural areas.
 To save the rural poor from the moneylenders.
 To cultivate the banking habits among the rural people and mobilize
savings for the economic development of rural areas.
 To increase employment opportunities by encouraging trade and
commerce in rural areas.
 To encourage entrepreneurship in rural areas.
 To cater to the needs of the backward areas which are not covered by
the other efforts of the Government.
 To develop underdeveloped regions and thereby strive to remove
economic dispar­ity between regions.
 Features
 The area of operation of a rural bank is limited to a specified region which
comprises of one or more districts.
 These banks cannot have a lending rate which is higher than the
prevailing lending rate of cooperative credit societies in any particular
state.
 They are public sector banks. The paid-up capital of each bank is Rs. 25
lakhs. 50 percent of the capital is contributed by the Central Government.
The concerned state government contributes 15 percent. 35 percent is
contributed by the sponsoring public-sector commercial banks.
 It grants loans and advance only to the small and marginal farmers,
agricultural laborer's, small traders\ entrepreneurs.
 This is sponsored bank. It is sponsored by a scheduled commercial bank.
 Functions
 Providing of loans and advance to the farmers and other person already
engaged in agriculture activities.
 Providing of loans and advance to the co-operative societies and other
society which are involved in agriculture processing .
 Accepting the various types of deposits from the rural and other
connected areas.
 providing loans and advances to small entrepreneurs and others who are
engaged in trade, commerce and industry.
 Setting up and Maintenance of godowns and warehouse.
 Reducing the dependency of weaker section of money lenders.
 Making backward and tribal areas economically better by opening new
branches and extending micro credit facilities and operating the scheme
of inclusion.
 Advantages
 They help in the development of agriculture and small-scale industries in
rural areas.
 They promote thrift and entrepreneurship among the rural people.
 They create employment opportunities in rural areas.
 They help in checking Migration from rural to urban areas.
 They play an important role in the implementation of government schemes
like the Integrated Rural Development Programme (IRDP), Minimum
Support Price (MSP) scheme, etc.
 They help in the development of social and economic infrastructure in rural
areas.
 They help in checking the monopoly of moneylenders and traders in rural
areas.
 They provide credit at reasonable rates to rural people.
 Problems
 Lack of capital: The authorised capital of RRBs is very low as
compared to that of commercial banks. This limits their ability to
expand their business and serve the rural people effectively.
 Lack of trained personnel: Most of the RRBs are located in
remote and backward areas, where it is difficult to attract and retain
trained personnel. As a result, they have to depend heavily on their
sponsor banks for advice and guidance.
 High cost of operations: The high cost of operations is another
problem faced by RRBs. This is due to the small size of their
business and the lack of economies of scale.
 Dependence on Sponsor Banks: RRBs are generally dependent
on their sponsor banks for day-to-day operations as well as for
financial assistance. This dependence often leads to a conflict of
interest between the two institutions.
Thank you.