Institute’s name: Global Institute For Corporate Education
Key words: RRBs, Institutional credit, Rural India, economic stability.
Abstract:
This is an attempt to analyze the various role, objective, functioning of regional rural banks operating in India. RRBs which were established with a mission to develop the rural economy by providing, institutional credit for the development of agriculture, trade, commerce, industry and other productive activities in the rural areas.
They tend to provide various credit policies to the small farmers at a reasonable rate of interest and other facilities to farmers, agricultural laborers, artisans and small entrepreneurs in the rural India as mention in the RRBs Act, 1976.
RRBs also took various innovative measures to improve standard of living of the farmers for e.g. Launch of Kisan Credit Cards to the farmers and organized over 5,000 out of 11,000 farmers’ clubs under NABARD scheme. Finding ways by which the standard of living of the rural India can be improved, establish a distribution system in the economy which is effective and functioned effectively.
This study is to find what the current situations is in the regional rural bank are and have recommended various ways to improve its lacking areas and attain greater success.
Introduction:
Rural India is the heart of the nation and contributes; to a greater extent, for the overall development of the country. Nearly 70% population of the country depends on agriculture and other primary activities. They are the supreme part of the country and for the welfare of rural population the government of India has taken many steps. However, government needs to provide special attention towards them and to bring the success at greater height, special initiatives should be taken. To provide financial assistance many regional rural banks were introduced and the first(RRB) was established on 2nd October 1975 which was sponsored by Syndicate bank, State Bank of India, Punjab National Bank, United Commercial Bank and United Bank of India.
These are set with an objective to provide enough institutional credit for rural market and agriculture. The Regional Rural Banks (RRBs) are formed with a motive of bringing economic development in rural India and to eliminate various systems like – money lending and zamindari system and other unfriendly farming systems.
Furthermore, the micro finances also have a vision of providing credit savings and insurance in rural India as another step to encourage agriculture by granting small loans and micro credit scheme which was especially for the rural sector of India.
However, there are various difficulties in implementing this formal source of finance such as rural people are more focus on taking loans from family and friends, local money lenders rather than obtaining from formal sources.
Objectives of Regional Rural Banks (RRBs):
(RRBs) represent government in rural sector and focus on improving the overall scenario in rural India by creating value and transparency in the financial system and also help by making large population economically independent.
Ø Providing institutional credit: A system in which regional rural bank provides timely, cheap and adequate credit to farmers.
Ø Enabling rural India at par with urban India: In order to bring overall development it is important that we should emphasis on rural prosperity so that regional imbalance is eliminated and promote modern technology for improved agriculture and rural business practices.
Ø Economic stability in rural India: Economic is the most vital thing for any country to keep prosperity and harmony with sufficient amount of wealth and system.
Ø To improve the financial health of rural India: In rural India the general way of obtaining cash is from informal sources resulting in exploitation to borrowers.
Roles of Regional Rural Banks (RRBs):
As Gandhiji has said “Real India lies in villages”, (RRBs) play various roles to improve the situation in rural India
Ø Upliftment of rural India: Rural India provides major chunk in the country’s GDP (gross domestic product) and is also responsible for daily functioning of an ordinary Indian household. RRBs help in uplifting the rural portion of India along with largely substantial economic growth.
Ø Responsible of growth of economy: Another major role played by (RRBs) is that they worked on improving the financial situation of rural people which ultimately leads to the growth of the economy.
Ø Familiarizing with banking system: The general public in rural India are not very aware with the banking system and various services providing by different banks. In this context, (RRBs) come into the picture and perform the challenging task of educating rural people and making them to use these services at ease.
Ø Create awareness and reduce exploitation: One of the major concerns of these organizations is to provide adequate and relevant information to the rural India which varies from technology, current situations (like FDI on Retail) and other happenings in and around which helps them to improve their current standards in terms of business and agriculture. By do so, RRBs avoid or reduces the level of exploitation in rural India which has taken many lives every now and then.
Expansions of Regional Rural Banks (RRBs):
Table 1: Expansion of Regional Banking: 1975-1990 | Dec. 1975 | Dec. 1980 | Dec. 1985 | Mar. 1990 | |
| Banks | 6 | 85 | 188 | 196 |
| Branches | 17 | 3,279 | 12,606 | 14,443 |
Source: www.macroscan.org
With expansion, RRBs provide a ray of hope to the people of rural India and make them productive in the years to come.
Current scenario and some changes:
If we see the way how RRBs operates today, there will be vast difference the way banks operated few years ago. There are number of reforms which are introduced, removed or upgraded. Here we bring out some of the latest changes in the policies of RRBs.
Ø LIC tied up with one of the RRBs. There are many banks and other financial service providers which are not reaching to the remote part of the country. Realizing this LIC has joined hands with Paschin Banga Gramin Bank in the state of West Bengal to make its insurance products available.
Ø RRBs have urged to the government to allow some branches to set up as extensions counters or even mobile bank branches.
Ø Launching of Kisan credit cards in order to reduce the time lapse of the farmer is the current good thing happen in the area of rural banking.
Challenges faced by RRBs:
Rural India where most of the decision are taken by heart rather by the mind, is a major challenge for the regional rural bank to operate, sometimes it is difficult for them to implement certain policies as the mindset of the people residing in these sectors are totally different as compared to that of urban India. RRBs face various other challenges in regard to this which are listed below:
Ø Resistance from the people: Individual who are from rural India generally do not welcome any change and takes longer time to accept the change as compare to their counter parts, most of the times they feel that something new is not good and the present situation is the best and it should not be replace by new things or system.
Ø Presence of traditional lending system: Rural India, where the traditional lending system still prevails is a major challenge for the RRBs. With their presence it has become a challenge for RRBs.
Ø Political challenges: In a country like India where currently the political scenario is not feasible like-scams, corruption and so on, it is very difficult for them to operate, survive and deliver the efficiency work for which they have set.
Ø Competition from various commercial banks: Another major challenge faced by the rural banks is that various other banks that are now effectively operating in the rural parts of India are creating threats for them and in some cases exploit the farmers in the name of welfare.
Ø Market challenges: Sometimes events occurring in the market place create severe situation for the banks especially for rural banks that are tied up with various commercial banks. Market conditions like inflation, deflation, recession, depression etc. have different effects and turn the coin other side.
Ways to overcome the challenges:
Ø Proper allocation of available resources: One of the ways through which we can gain efficiency is by planning the allocation of funds and resources.
Ø Introduction of transparent procedure and policies: The overall procedure to get a bank loan should be made in such a way that should be transparent and clear to everyone.
Ø Time factor: The time also makes a huge difference. The banking timing should be made in such a way that is suitable for public.
Ø Educating the users: Initially the people who use the banking facilities should be given proper training and 24*7 assistance should be provided.
Ø Necessary arrangement should be done not only as banking solutions but also other facilities like helping them to understand policies, guiding to fill forms etc.
Ø Effective usage of available technology: technology plays a very important role. It is through technology that we can introduce many other facilities and enhance rural banking.
Conclusion:
We have seen that it has been nearly 35 years that since the inception of RRBs. Many objectives have been achieved however some more are still to get and the struggle is still going on. It is not only through these micro finances we can get the set goals. Indeed, many others factors like government policies, interest of general people are also very crucial and therefore the objectives can me met only if everything goes on hand to hand.
Ultimately, we can say that rural market is one the potential market which will take the economy of the country to the greater height, RRBs are not only promoting and developing banking system in rural parts of the country by delivering better banking solutions and services but also helping the country to tighten its position in global economy and has contributes a lot for the emergence as one of the fastest developing countries in the world. Furthermore, these RRBs also promise bright future, harmony and prosperity in the entire nation.
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