REGIONAL RURAL BANKS (RRBS) (Syllabus: GS Paper 3 – Economy)

Context: The Union Ministry of Finance is planning to consolidate the Regional Rural Banks (RRBs) under a policy of “One State, One RRB” to improve their efficiency and avoid undue competition among sponsoring public sector banks.

Regional Rural Banks (RRBs)

• About: This is a government owned scheduled commercial bank of India that operates at regional level in different states of India.
• Establishment: 26 September 1975 and the RRB Act 1976
• Nodal Ministry: Ministry of Finance
• Five RRBs: Set up on 2 October 1975 on the recommendations of the Narsimha Committee.
• Ownership: Central government, state government, and the sponsoring bank with 50%, 15%, and 35% shareholding respectively.
• First RRBs Bank: Prathama Bank, Uttar Pradesh.
• Functions of RRBs: Providing basic banking services in rural and semi-urban areas, facilities such as locker services, internet and mobile banking, debit and credit cards, extend credit to rural individuals like small farmers, artisans, and entrepreneurs, while also accepting deposits.

One State, One RRB

• Aim: To improve their efficiency and avoid undue competition among sponsoring public sector banks.
• To reduce the total number of RRBs from 43 at present to around 30,” said a senior government official requesting anonymity.
• Significance: It will help with this and also reduce competition among them.