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Regional Rural Banking

Submitted By :Aditi Ahuja GA-072

Pratiksha Baid
Prerit Jain Jyoti Munot

GB-047
GJ-053
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As GANDHIJI once Quoted

Real India lies in Villages,


Village economy is the backbone of Indian economy. Without the upliftment of the rural economy as well as the rural people of our country the objectives of economic planning cannot be achieved.

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Rural Banking started since the establishment of banking sector in India. Mainly focused upon the Agro- Sector.

Introduction

In rural banking in India, there are 14,475 rural banks in the country of which 2126 (91%) are located in remote rural areas.
SBI- Largest Bank Catering to rural banking.

Haryana State Co-operative Apex Bank Limited, NABARD, Sindhanur Urban Souhadra Co-operative Bank, United Bank of India are other banks operating in rural markets.

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Current Status
Rural population of about 780 million with limited access to financial services. A high proportion of rural lending is from informal sources.

About 500-600 million people in India still do not have bank accounts.
Rural economy (agriculture +on agriculture) constitutes about 50% of the GDP. Banks have woken up to the potential in the rural sector. Current demand for credit in rural India is around Rs. 1,33,000 Crores. Commercial bank branches cover only 7% of rural sector & large market is still untapped. Free Powerpoint Templates

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Objectives Of RRB
1) Overall economic development of a country 2) Freeing of rural masses from acute poverty and unemployment. 3)Meeting the needs of the weaker sections of the rural population consisting of:a) Small and marginal farmers b)Agricultural laborers c)Artisans d)Small entrepreneurs Free Powerpoint Templates 4)Mobilize deposits from rural households Page 5

Credit Delivery System


2)Lending to individuals belonging to weaker sections without checking the viability of the activity proposed to be undertaken

1)Grant of credit at cheap or

concessional
rates

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Operational Areas Of RRB


The area of operation of RRBs is limited to the area as notified by GOI covering one or more districts in the State
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Ownership Of RRB
GOI 50%

RRB
STATE GOVERNMENT 15% SPONSOR BANK 35%
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RBI Assistance To RRB


With a view to facilitate RRBs operations, the RBI gave RRBs direct access to refinance assistance at a concessional rate of three per cent below the bank rate and allowed to maintain a lower level of SLR than commercial banks. Allowed to pay half per cent more interest on all deposits except those of three years and above. Sponsor banks IDBI, NABARD, SIDBI, and other FIs are statutorily required under the RRBs Act to provide managerial and financial assistance to RRBs.
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Evaluation Of RRBs
Preference for opening bank branches than commercial banks

The eligible business of commercial banks rural branches may be transferred to RRBs.
The losses in initial years of RRBs may be met by shareholders and equity capital should also be raised. The various facilities provided by sponsor banks should continue for 10yrs in each case Concessionary refinance by RBI should be continued The control, regulation, and promotional responsibilities should be Free Powerpoint Templates transferred from the GOI to RBI or NABARD. Page 10

Regulatory Control
RRBs are allowed up to December 31, 2000 to maintain cash reserves at 3per cent of their demand and time liabilities In 1998-99 NABARD introduced several policy measures for improving overall performance. They are:a)Quarterly / half yearly review of RRBs b)Merger of RRBs coming under a sponsor bank and operating in other area c)Off-site surveillance d)Introduction of Kissan Credit Cards for provision of credit to farmers.
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INDICATORS No of RRBs No of districts No of branches Deposits Borrowing Investment No of RRB in profit

31-3-2009 196 518 14446 56350 4595 36135 163

31-3-2010 196 523 14484 62143 5524 36761 166

31-3-2011 113 525 14494 71329 7303 41182 111

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What is needed from BANKS ?


Focus on non farm rural business. Greater level of financial inclusion. Reach out to the needy through micro credit/ SHGs. Easy & affordable financial services through the best use of technology. Improvement in service level in rural areas. Extend banking services at the customers convenience.
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What is needed from GOVERNMENT


?

Constitute an authority for National Mission on Financial Inclusion. Draw a road map for replicating the successful pilots. Establish open standards for technology to be used. Undertake a massive program for financial literacy & credit counseling. Include SHGs as BC.
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Expand Reach
Tie up with India Post to penetrate the Rural Market.

Partner with NGO/MFI to act as business facilitators.

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Gap Analysis
The Poor requires.. Mechanism to keep their limited resources safely. Credit to meet emergencies. Credit for micro enterprise. Facility to receive remittances.

Have access to hasslefree financial services. Free Powerpoint Templates

Banks.. Sustainable approaches products that matches needs & capacities & reduces transaction costs & times

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Bank A/cs Saving Credit Cards Empowerment of SHGs

Payments + Remittances

Facilities provided by RRB

Insurance

Financial Advice
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Lack of Assets
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Affordable Credit

Case Study

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Largest Commercial Bank in India

Largest Branch Network9247

Rural & Semi Urban Branches6473

It has 30 banks in India known as RRBs

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Total no. of SBI RRBS in India branches are 2349 (16%)

Rural banks of SBI is spread in 13 states extending from Kashmir-Karnataka & Himachal PradeshNorth East. Bank is actively involved since 1973 in non profit activity called Community Services Banking

Social obligation services like ETicketing

Micro Finance deeply ingrained in SBI

Comprehensive financial services viz savings, credit, insurance & financial products through ICT

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Some Rural Projects Of SBI


SBI TINY ACCOUNT
Opening of simple savings A/c for the villagers with zero balance. One of the villagers as SBI Mitra. Small emergency loans. SBI Mitra assists in opening A/c. Drop box for depositing cash- at the SBI Mitras shop/house. Piloted in Bahirgaon village in Maharashtra.
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SBI TINY SMART CARDS


A smart card with photo & fingerprint. Cards serves as the A/c. Can be used for Govt. disbursals, insurance & loan disbursals.

KCC
This is medium limit card of Rs.20,000. Farmers can withdraw partial amt from the card. 2.5% annual interest only Free on withdraw led amt. Powerpoint Templates

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Goals of SBI
Issue 1 crore IT enabled No Frill Accounts through alternate channels. Open 15 Lakhs No Frill A/c through bank branch channels. Open 870 new branches under second wave of branch expansion program. Open atleast 250 rural household A/cs at each rural & semi urban branch every year as per GOI directives. increase outreach through 25,000 Customer Service Point outlets of BC/BF.

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Articles & Headlines

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regional rural banks count will reduce to 46 as government starts consolidation


December 1, 2011 | Atmadip Ray , ET Bureau KOLKATA: The government has kicked off a major consolidation exercise among regional rural banks , which play an intense role in the country's scheme of financial inclusion. It plans to amalgamate geographically contiguous RRBs within a state, to help optimise the use of resources, three persons familiar with the development said. As many as 63 RRBs will come under the purview of amalgamation and 27 larger and stronger banking entities will...

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Banks told to integrate operations with regional rural banks for rural lending

September 10, 2011 | Dheeraj Tiwari , ET Bureau

NEW DELHI: In an attempt to extend the reach of banks in rural and semi-urban areas, the finance ministry has asked public sector banks to integrate their operations with regional rural banks (RRBs). "Charges for various banking services used by customers of RRBs are to be aligned with the sponsoring banks," a finance ministry official said on condition of anonymity. "Further, cheques or drafts issued by RRBs should be treated at par with their...
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Govt to open over 3,100 regional rural banks branches in two years

RBI deregulates interest on savings accounts in regional rural banks.


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