What are Regional Rural Banks? functions of the Regional Rural Banks

Contents

Regional Rural Banks (RRBs)

Regional Rural Banks were established to spread banking facilities in the rural areas of the country. The main object of these banks is to grant institutional loan at the concessional rate to the people from the weaker sections of the society. Rural savings are collected through the Regional Banks and are invested in productive activities.

Regional Rural Banks are rural-oriented and are organised in the commercial firm. These are relatively new banking institutions. These were commenced on October 2, 1975.

Regional Rural Banks are separate body corporate having perpetual succession and common seal. These banks are closely linked with commercial banks. Commercial bank has sponsored the proposal to establish it. The Government of India specifies the local limits of the operation of the R R Bs. R R B may establish its branches within the notified local area.

Capital of Regional Rural Banks: In the biginning of R R Bs, the authorised share capital was determined Rs. 1 crore. It was divided into 1 lakh shares of Rs. 100 each. Paid up capital of each RRB is Rs. 25 lakhs. 50 per cent of issued capital was subscribed by the Central Government, 35% by the sponsor bank and 15% by the concerned state government.

According to the provisions of the Regional Rural Bank (Amendment) Act, 1987, the authorised share capital of the Regional Rural Banks has been raised to Rs. 5 crores and paid up capital to Rs. 1 crore.

Management- Regional Rural Banks are managed by a Board of – Directors. The Board of Directors comprises 9 members. Member of the Board of Directors are nominated by the shareholders. General instructions and managerial functions are vested in Board of Directors. The Board of Directors acts on business principles and public interest. The Bank followed the instructions issued by the Central Government in relation to public interest.

Functions of Regional Rural Banks

Generally functions of ordinary banking are undertaken by the regional rural banks. According to Section 5 (b) the Banking (Regulation) Act, 1949 following functions are included in banking functions which are also done by the regional rural banks:

(i) Lending money,

(ii) Accepting such deposits for investment from public which are payable at call and short notice.

Following functions can be done by the Regional Rural Banks:

1. Granting of Loans and Advances to Small and Marginal Farmers and Agricultural Labourers – Small and marginal farmers and agricultural labourers are provided loan and advances for the purpose of agriculture by the R R Bs. Regional Rural Banks also provide this facility to regional co-operative societies etc. These Co-operative societies can be agricultural marketing societies, Co operative agricultural societies, agricultural processing societies, farmers credit societies etc.

2. Granting of advances loans and advances to persons other than farmers and, landless labourers, craftsman etc.