Chapter No. 03: Role and Importance of Gramin Bank in Agricultural and Rural Development.

Transcription

1 Chapter No. 03: Role and Importance of Gramin Bank in Agricultural and Rural Development. 3.1 Introduction. 3.2 Challenges for Rural and Agricultural Credit. 3.3 Historical Development of RRBs. 3.4 Need For Rural Banking in Rural and Agricultural Areas. 3.5 Agricultural Credit. 3.6 Importance of RRBs in Agricultural Finance 3.7 The Role and Performance of Rural Banks. 3.8 Key Factors of Performance of RRBs. 3.9 Revitalizing RRBs RRBs: Financial Sector Reforms Reducing Cost of Rural Credit RRB: Reform Process RRB's Potential Role in Financial Inclusion Significant Improvement in Regional Rural Banks (RRB's) Performance State wise List of the RRBs Details of RRB Branches for the years , & Financial Performance Comparative position of performance of RRBs Expanding the role of RRBs: 127

2 3.1 Introduction: During the 1960s and 1970s the key issue in agriculture and rural development was agricultural production. Agricultural credit was but an input, next to improved seeds and seedlings, fertilizer, pesticides, tools and machines. The target group was farmers. The issue was how to disburse agricultural credit to farmers. The funds were provided by governments and donors. Disbursement mattered, not repayment. The main disbursement channels were agricultural development banks and projects. Agricultural credit was a service, not a business. The strategy had much to show: the green revolution, driven by technology, financed on credit, with subsidized interest rates. The produce was purchased by government at guaranteed prices. 1 So impressive was the business of the green revolution that the business of the financial service was ignored. But when farmers didn t repay their loans, the banks didn t cover their costs and the governments ran out of money to finance the subsidies, the banking business finally failed, and so did the service. Meanwhile, populations continued growing, increasing numbers of rural people could not live on agriculture alone. To survive they had to engage in numerous activities: on-farm, off-farm and non-farm. Rural households and rural economies got increasingly diversified. Access to finance was the limiting factor. Agricultural credit had been exclusive. It excluded all those who didn t own and till the land: labourers, microentrepreneurs, traders, women and large numbers of smallholders too poor to pay the bribes and too uneducated to do the paperwork. The unsatisfied demand prepared the ground for a revolution on the supply side: microfinance. Perhaps this should be called the blue revolution, blue being the bankers colour. The new emerging 128

3 issue was now how to link microfinance to rural entrepreneurs: through inclusive financial systems development. Regional Rural Banks have been in existence for around three decades in the Indian financial scene. Inception of regional rural banks can be seen as a unique experiment as well as experience in improving the efficacy of rural credit delivery mechanism in India. With joint share holding by Central Government, the concerned State Government and the sponsoring bank, an effort was made to integrate commercial banking within the broad policy thrust towards social banking keeping in view the local peculiarities. The genesis of the RRBs can be traced to the need for a stronger institutional arrangement for providing rural credit. The Narsimham committee conceptualized the creation of RRBs in 1975 as a new set of regionally oriented rural banks, which would combine the local feel and familiarity of rural problems characteristic of cooperatives with the professionalism and large resource base of commercial banks. Subsequently, the RRBs were set up through the promulgation of RRB Act1 of Their equity is held by the Central Government, concerned State Government and the Sponsor Bank in the proportion of 50:15:35. 2 RRBs were supposed to evolve as specialized rural financial institutions for developing the rural economy by providing credit to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs. Over the years, the RRBs, which are often viewed as the small man s bank, have taken deep roots and have become a sort of inseparable part of the rural credit structure. They have played a 129

4 key role in rural institutional financing in terms of geographical coverage, clientele outreach and business volume as also contribution to development of the rural economy. A remarkable feature of their performance over the past three decades has been the massive expansion of their retail network in rural areas. From a modest beginning of 6 RRBs with 17 branches covering 12 districts in December 1975, the numbers have grown into 196 RRBs with 14,446 branches working in 518 districts across the country in March 2004 and thereafter in the total banks were 82 with 15,475 branches in 518 districts. 3 RRBs have a large branch network in the rural area forming around 43 per cent of the total rural branches of commercial banks. The rural orientation of RRBs is formidable with rural and semi-urban branches constituting over 97 per cent of their branch network. 4 The growth in the branch network has enabled the RRBs to expand banking activities in the unbanked areas and mobilize rural savings. Regional Rural Banks in India are an integral part of the rural credit structure of the country. These banks played a pivotal role in the economic development of the rural India. The main goal of establishing regional rural banks in India was to provide credit to the rural people who are not economically strong enough, especially the small and marginal farmers, artisans, agricultural labors, and even small entrepreneurs. The importance of the rural banking in the economic development of a country cannot be overlooked. As Gandhiji said Real India lies in villages, and village economy is the backbone of Indian economy. Without the up-liftment of the rural economy 130

5 as well as the rural people of our country, the objectives of economic planning cannot be achieved. In fact, the real growth of Indian economy lied in the emancipation of rural masses from acute poverty, unemployment, and socio-economic backwardness. Keeping this end in view, various important plans and programmes of rural development have been conceived and implemented by the government of India since the commencement of first five-year plan from But an appraisal of the achievement of these programmes clearly reveals that much programmes failed to achieve the desired objectives due to the backward economic condition and lack of adequate finance to the poor people in the rural areas. Hence, bank and other financial institutions are of vital importance for development of rural economy of a country Challenges For Rural and Agricultural Credit: Agriculture is a matter of livelihood and food security, with nearly 60 per cent of the population depending on it. At the same time, to withstand the global competition, enhanced productivity and sustainability of the agriculture sector has become imperative. In addition, the majority of the country s population, more so marginal and disadvantaged sections of society, stay in villages. Hence, the role of banks in the enhancement of agriculture productivity, expansion of rural credit and poverty eradication assumes high priority. 6 despite decades of efforts and experimentation in banking, the organized financial sector is still not able to meet the credit gap in the rural sector. The lower levels of per capita income, lack of infrastructure in the rural areas, focus in the urban sector and lack of proper connectivity were the main hindrances for banks to venture into rural areas. Directed lending, cumbersome proce- 131

6 dures, delay in sanctioning loans and lack of statutory backing for recoveries were other major impediments to the growth of banking in the rural sector. Rural credit is the credit which is given to the farmers for agriculture and other purposes relating to agriculture and rural purposes. There are many difficulties in regarding with the rural credit expansion in India. There is no flow of the credit to the small farmers. Big land lord and political strong land lards get loan for themselves and needy and poor farmers do not get any type of credit to meet their seasonal expenses. Too much documents are required for attuning credit and small farmers of the village are uneducated, therefore, they do not apply for credit. If some farmers succeed in completing all documents and their loans have been approved but there is always delay in disbursement of loan. Rate of interest is very high in rural credit; small farmers cannot afford this rate of interest offered by the financial institutions. In India, many loans to big landlords have been written off because of their political pressure and there is always delay in returning of loans which is serious problem of rural credit. Reaching the small farmers is very expensive for an individual institution because they are far from urban areas and they have no branches of financial institutions in the rural areas. Most of the farmers of our country are uneducated and they do not know the importance of credit and they do not take interest in credit 132

7 3.3 Historical Development of RRBs: The history of regional rural banks in India dates back to the year It's the Narsimham committee that conceptualized the foundation of regional rural banks in India. The committee felt the need of 'regionally oriented rural banks' that would address the problems and requirements of the rural people with local feel, yet with the same level of professionalism of commercial banks. Five regional rural banks were set up with a total authorized capital of 1 crore, which later augmented to 5 crore. There were five commercial banks, viz. Punjab National Bank, State Bank of India, Syndicate Bank, United Bank of India and United Commercial Bank, which sponsored the regional rural banks. The equities of rural banks were divided in a proportion of 50:35:15 among the Central Government, the Sponsor bank and the concerned State Government. 7 The following years have not been so easy for the regional rural banks in India, as there were major concern of financial viability. A number of committees were formed to find out solution. Studies were conducted to find out the factors that influence RRBs performance. The roles played by the sponsor banks were also analyzed. The literature on RRBs recognizes a host of reasons responsible for their poor financial health. According to the Narasimham Committee, RRBs have low earning capacity. They have not been able to earn much profit in view of their policy of restricting their operations to target groups. The recovery position of RRBs is not satisfactory. There are a large number of defaulters. Their cost of operation has been high on account of the increase in the salary scales of the employees in line with the salary 133

8 structure of the employees of commercial banks. In most cases, these banks followed the same methods of operation and procedures as followed by commercial banks. Therefore, these procedures have not found favour with the rural masses. In many cases, banks have not been located at the right place. For instance, the sponsoring banks are also running their branches in the same areas where RRBs are operating. The issue whether location matters for the performance has been addressed in some detail by Malhotra. Considering 22 different parameters that impact on the functioning of RRBs for the year 2000, Malhotra asserts that geographical location of RRBs is not the limiting factor for their performance. He further finds that it is the specific nourishment which each RRB receives from its sponsor bank, is cardinal to its performance. In other words, the umbilical cord had its effect on the performance of RRBs Need For Rural Banking in Rural and Agricultural Areas: The rural population in India suffers from a great deal of indebtedness and is subject to exploitation in the credit market due to high interest rates and the lack of convenient access to credit. Rural households need credit for investing in agriculture and smoothening out seasonal fluctuations in earnings. Since cash flows and savings in rural areas for the majority of households are small, rural households typically tend to rely on credit for other consumption needs like education, food, housing, household functions, etc. Rural households need access to financial institutions that can provide them with credit at lower rates and at 134

9 reasonable terms than the traditional money-lender and thereby help them avoid debt-traps that are common in rural India. Banks play an important role in mobilization and allocation of resources in any country. Rural people in India are facing problems in the inadequate supply of credit. The major source of credit to rural households, particularly-low income working households, has been the informal sector. Informal sector advances loans at very high rates of interest; the terms and conditions attached to such loans have given rise to an elaborate structure of intimidation of both economic and non-economic conditions in rural population in India. RRBs were established in India for the purpose of taking banking service to the doorsteps of rural people, particularly in places without banking facilities Agricultural Credit: The progress of agricultural credit in India has depended crucially on government intervention over the years i.e. package of incentives and policy measures, which the RBI and the Centre formulate and implement. The growth of commercial banks lending to agriculture and allied activities witnessed a substantial decline in the 1990s as compared to the 1980s. Credit flow to the agriculture sector from all formal sources amounted to Rs. 70,810 crore in and Rs. 86,981 crore in , much below the levels envisaged in the Tenth Plan. Agriculture s share in scheduled commercial banks total outstanding credit as on 31 st March 2005 was only Rs. 1,12,475 crore. The total agricultural lending by commercial banks is lower than credit in personal loans which stood at Rs. 2,66,988 crore, comprising advances for housing and 135

10 consumer durables. In recent years, retail advances have increased by 41.2 per cent in as compared to the growth of 27.9 per cent in the overall loans and advances of Scheduled Commercial Banks. As a result, their share in total loans and advances increased significantly during the year ended March However, according to the study only 15 out of 85 banks registered an increase in return on assets as at the end of over Hence, the argument that rural credit drives down the banks profits and increases NPA is not justified. NPA in rural credit are far less and the rate of retrieval of rural credit NPAs is faster than other advances. The annual growth rate of farm credit is around 15% and this growth in rural advances essentially comes from advances like gold loans for agriculture and Kisan Cards. About 70% of the present rural credit stock of over Rs crore is Kisan Credit Cards spread over 4.8 crore of such card holders. This shows the narrow focus of the banks towards short erm production loans rather than for term loans Importance of RRBs in Agricultural Finance: The RRBs were established with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto. RRBs established with the explicit objective of Bridging the credit gap in rural areas, Check the outflow of rural deposits to urban areas & Reduce regional imbalances and increase rural employment generation. The main objectives of setting up 136

11 the RRB are to provide credit and other facilities especially to the small and marginal farmers agricultural labourer s artisans and small entrepreneurs in rural areas. Each RRB will operate within the local limits specified by notification. If necessary a RRB will also establish branches or agencies at places notified by the Government. Each RRB is sponsored by a public sector bank which provides assistance in several ways viz., subscription to its share capital provision of such managerial and financial assistance as may be mutually agreed upon and helps the recruitment and training of personnel during the initial period of its functioning. Every RRB is authorized to carry on transacting the business of banking as defined in the Banking Regulation Act and may also engage in other business specified in Section 6 (1) of the said Act. In particular a RRB is required to undertake the business of (a) granting loans and advances to small and marginal farmers and agricultural laborers whether individually or in groups, and to cooperative societies including agricultural marketing societies agricultural processing societies cooperative farming societies primary agricultural credit societies or farmers service societies primary agricultural purposes or agricultural operations or other related purposes, and (b) Granting loans and advances to artisans small entrepreneurs and persons of small means engaged in trade commerce industry or other productive activities within its area of operation. The Reserve Bank of India has brought RRB s under the ambit of priority sector lending on par with the commercial banks. They have to ensure that forty percent of their advances are accounted for the priority sector. Within the 40 per cent priority tar- 137

12 get, 25 per cent should go to weaker section or 10 per cent of their total advances to go to weaker section. 3.7 The Role and Performance of Rural Banks: In the Indian financial sector, the role of the rural banks is important but not apparently pre-eminent. The contribution of the commercial banks to the rural / semi-urban banking network is far higher (at 38% of the total) than the 28 per cent contribution of rural banks to the total of 87,000 bank branches in India. Despite the apparent importance of commercial banks even in the rural areas however they are neither able nor willing to serve the poorest sections of the population. By comparison, in the credit categories of direct relevance to financial inclusion, RRBs hold 26.2 per cent of agricultural credit accounts and as many as 55.0 per cent of all artisan/tiny industry loan accounts. This amounts to much lower proportions of overall credit available under these categories just 10.9 per cent and 11.0 per cent respectively since RRB loan sizes average just Rs 25,000 and Rs13,000 for these two categories, much smaller than those offered by the commercial banks. Yet, it is precisely this fact that shows the importance of the rural banks for otherwise financially excluded sections of the population. 12 Low income families have a much lower absolute and proportionate need for credit than better off sections of the population that are, in any case, better able to access the commercial banks. Similar data for cooperatives is not available but with an estimated 130 million members the average loan outstanding with cooperatives amounts to just over Rs9,000 per 138

13 member, emphasizing their suitability to the needs of low income families. Taken together, the rural banks record a credit-deposit ratio of 81.7 per cent in March 2007, somewhat higher than the average of 76.1 per cent for the entire banking system. Rural banks have, for a number of years, been regarded as the step-child of the banking system in India. Both types of rural banks have been subject to extensive interference in their operations, being seen as a conduit for government subsidies and a means of political patronage. It is not surprising, therefore, that both the cooperative credit system and RRBs have encountered serious financial difficulties and were virtually crippled in the early 1990s, needing a substantial injection of capital at that time. The performance of such banks in recent years has been somewhat better though. Thus, 85 per cent of the RRBs and around 75 per cent of cooperative banks are now profitable on a year-on-year basis. While all the RRBs taken together now regularly register a profit, the DCCB performance is erratic with significant numbers slipping into losses before recovering from one year to the next. In March 2003, as many as 144 out of 367 DCBs were reported to have completely eroded their net worth and to have eroded Rs3,100 crore worth of deposits as well. 13 The RRBs, over the years have made impressive strides on various business indicators. For instance, deposits of RRBs have grown by 18 times and advances by 13 times between 1980 and Between 1990 and 2004, deposits and advances grew by 14 times and 7 times, respectively. Between the year 2000 and 2004, loans disbursed by RRBs more than doubled reflecting the efforts taken by the banks to improve credit flow to the rural sector. The 139

14 average per branch advances also increased from Rs.25 lakh in March 1990 to Rs.154 lakh in March When one considers the deployment of credit relative to the mobilization of resources, the credit-deposit (C-D) ratio of RRBs were more than 100 per cent during the first decade of their operations up to Though the C-D ratio subsequently became lower, of late, it has shown an improvement and went up from around 39 per cent in March 2000 to 44.5 per cent in March Key Factors of Performance of RRBs: Limited area of operation: With a narrow range of business activities and small base of clients leading to high covariant risk. Focus on small customers: such as small and marginal farmers, small transport operators, small and micro-enterprises and self help groups with limited credit requirements making it impossible to earn bulk incomes from larger, high income borrowers to cross-subsidies lending to the main customer group. Perception as an instrument of social policy: Without viability considerations while there was pressure to improve financial performance, resulting in uneven growth A capital base that is too low for their business volume: Resulting in a serious prudential hazard whereby hundreds of crore rupees of deposits were underpinned by just Rs1 crore of capital. Small organizational structure and limited financial assets: Come in the way of garnering a larger share of the rural financial market by making it difficult to provide a full range of 140

15 financial services, thereby discouraging large depositors and borrowers. High loan delinquencies: Resulting from their use for directed lending by the State High cost of servicing numerous small accounts: While the interest cost of funds from NABARD and sponsor banks was higher than market rates but rates of interest charged to customers had to be kept in line with the competing commercial banks. Poor financial skills: Resulting in an inefficient allocation of resources and parking of large amounts with sponsor banks. Conflict of business interests with sponsor banks: that operates in the same areas but has been responsible for the financial and business initiatives of their RRBs. Lack of professionalism in management: As senior managers (including Chairmen) are appointed out of the serving officers of the sponsor bank which results often in the reference of small matters to the sponsor with consequential delays in decision making. Lack of skilled staff: Resulting from inappropriate training and lack of exposure to new products and development activities for catering to the changing requirements of the rural sector. An ageing staff profile resulting from the ban on recruitments has constrained efficiency in operations and uniform norms and policies across the country ignoring local issues and conditions have lowered staff morale reducing involvement in development tasks. Inappropriate wage structure: Which was brought in line with the higher wages of the commercial banks even as RRBs 141

16 were required to retain their rural flavor to identify with the rural population, yet they were required to adhere to an Administered interest rate regime: That depressed rates since they were lending to the weaker sections and yet were required to pay a slightly higher rate than commercial banks on deposits. 3.9 Revitalizing RRBs: RRBs have established themselves as a strong alternative mechanism for rural credit delivery, their potential and relevance is rather neglected in the current scenario. The issue of capital infusion of RRBs assumes critical importance to enlarge the scope of RRB operations. RRBs need to be provided with adequate capital support to enable them to have a net capital adequacy ratio (CAR) of 5 per cent. The share of sponsoring institutions in the capital structure of RRBs also needs to be enlarged to make them majority shareholders. By acquiring the majority shareholding in RRB, the sponsor banks can convert them into vibrant and professional subsidiaries and area-specific special business units (SBU). 15 In the long run, they may merge all their agricultural and rural activities under the umbrella of these SBU. The government should further amalgamate regional rural banks with the sponsor banks to increase the reach of PSBs in rural areas. With the merger of RRBs with sponsor banks, the latter will get a wide branch network in rural areas. In the long term, however, a single independent owner of all RRBs with exclusive focus on rural and micro-credit would be a great step towards channelizing resources for the purpose for which RRBs were established. 142

17 3.10 RRBs: Financial Sector Reforms: Several changes have taken place in the focus and operation of the Regional Rural Banks in the wake of financial sector reforms in India and various measures have been taken by the Government to improve the commercial viability of RRBs since So it has been considered appropriate to study the performance after amalgamation which took place in the year 2006.A study of the efficiency and its performance of the RRB are particularly important in the Indian context. In the wake of introduction of financial sector reforms in , the commercial viability of RRBs emerged as the most crucial factor in deciding about their desired role due to their limited business flexibility with hardly any scope of expansion /diversification, smaller size of loans with higher exposure to risk-prone advances and professional efficiency in financial deployment. To strengthen RRBs and improve their performance many initiatives have been taken by the Government of India and the Reserve Bank of India. As part of the comprehensive restructuring programme, recapitalization of RRBs was initiated in the year The process continued till and covered 187 RRBs with aggregate financial support of Rs crore from the shareholders, viz., Government of India, State Governments and sponsor Banks in the ratio of 50:15: Further, the branch licensing policy for RRBs has been liberalized. Under the new norms, empowered committees at the regional offices of RBI clear RRB application to open new branches. 143

18 The branches of RRBs may undertake government business including conducting foreign exchange business with the prior approval of the concerned Government authority and RBI. These banks have also been allowed to open extension counters at the premises of the institutions of which they are principal bankers after obtaining license from the concerned regional office of the RBI. The RRBs need not obtain permission of RBI for the installation of ATMs at the branches and extension counters for which they hold licenses issued by RBI. They are also permitted to open off-site ATMs after assessing the cost and benefit. As against the earlier policy of opening a large number of branches in far flung rural areas, RRBs have been permitted to merge/close down their unviable branches and the branch licensing policy for RRBs is almost at par with that for commercial banks. Now RRBs compete with the commercial banks in rural credit market of India. RRBs give loans for agriculture and rural development while commercial banks also serve needs of commerce and industry in rural areas. In , the Government of India initiated the process of structural consolidation of RRBs by amalgamating RRBs sponsored by the same bank within a State as per the recommendations of the Vyas Committee (2004). The amalgamated RRBs were expected to provide better customer service due to better infrastructure, computerization of branches, pooling of experienced work force, common publicity, marketing efforts etc., and also derive the benefits of a large area of operation, enhanced credit exposure limits and more diverse banking activities. As a result of the amalgamation, the number of RRBs was reduced from 196 to 86 as on 31st March, Thus, under the 144

19 amalgamation process, 145 RRBs have been amalgamated to form 45 new RRBs Reducing Cost of Rural Credit: A different dispensation under CRR and SLR would help in making available more resources for rural credit deployment. The rate of interest paid on CRR balances held by these rural institutions might also be marginally above what is paid to commercial banks. Similarly, the Central Government and all State governments need to park their rural developmental funds with RRB to ensure cheaper flow of demand deposits. Regulation with respect to banking has been designed for delivery in urban India and distribution required more manpower to be deployed in rural areas. All rural financial institutions need special dispensation suited to their local potential and challenges. The overall position of RRBs in India is not quite encouraging. The poor credit-deposit ratio is still making dent on the improvable functioning of RRBs. Since the RRB is supposed to be a bank for poor people, its presence in all the states of country especially in underdeveloped States can make things better. The government should spread the branches of RRBs at grass root level to provide such banking service to the really needy rural people. Moreover, it is the responsibility of the bank management and the sponsored bank to take corrective measures to raise the creditdeposit ratio of the bank that would make RRBs relevant in the rural India. 145

20 3.12 RRB: Reform Process: RRBs started their development process 1975 with the formation of a single bank. However, within a very short time, most banks were making losses. The original assumptions as to the low cost nature of these institutions were belied. When the reform process in the banking sector was initiated, RRBs were taken up for a close look. The GOI in consultation with RBI and NABARD started the reform process thru a comprehensive package for RRBs including cleansing their balance sheets and recapitalizing them. Extant lending restrictions were removed and space and variety available for investment of their surplus funds was expanded. Simultaneously, a number of human resource development and Organizational Development Initiatives (ODI) were taken up by NABARD with funding support of the Swiss Development Corporation (SDC) and with the tools of training and exposure visits, ODI, technology support, computerization and use of IT, system development, etc. for business development and productivity improvement. By end March 2005, there was a remarkable improvement in the financial performance of RRBs as compared to the position prevailing in The number of banks reporting profits went up to 166 of the 196 RRBs. As on 31 March 2006, of the total 133 RRBs (post merger), 111 posted profits and 75 of these RRBs were sustainably viable organizations having no accumulated losses as also posting current profits. 18 GOI initiated the process of structural consolidation of RRBs by amalgamating RRBs sponsored by the same bank within a State as per the recommendations of the Vyas Committee (2004). The amalgamated RRBs were expected to provide better customer 146

21 service due to better infrastructure, computerization of branches, pooling of experienced work force, common publicity / marketing efforts, etc. and also derive the benefits of a large area of operation, enhanced credit exposure limits and more diverse banking activities. As a result of the amalgamation, the number of RRBs was reduced from 196 to 133 as on 31 March, 2006 and to 96 as on 30 April Thus, under the amalgamation process, 145 RRBs have been amalgamated to form 45 new RRBs RRB's Potential Role in Financial Inclusion: Post-merger RRBs represent a powerful instrument for financial inclusion. Their outreach vis-à-vis other scheduled commercial banks particularly in regions and across population groups facing the brunt of financial exclusion is impressive, as observed from an analysis of Basic Statistical Returns of the RBI and indicated in the following paragraphs. With merger infusing the much needed financial strength in RRBs coupled with the local feel and familiarity they command, RRBs are in a unique position to play a decisive role in financial inclusion. In rural areas, RRBs account for a substantial 37 per cent of total offices of all scheduled commercial banks. In semi-urban areas, their share comes to 15 per cent. It goes without saying that exclusion is more severe in rural areas Significant Improvement In Regional Rural Banks Performance: The establishment of the Regional Rural Banks was initiated in 1975 under the provisions of the ordinance promulgated on 1975 and thereafter Section 3(1) of the RRB Act, The issued capital 147

22 of RRBs is shared by Central Government, sponsor bank and the State Government in the proportion of 50 per cent, 35 per cent and 15 per cent respectively. The area of operation of a majority of the RRBs is limited to a notified area comprising a few districts in a State. In the year 2005, a process was initiated for the structural consolidation of RRBs sponsored by the same bank within a State. As a result of amalgamation, 196 RRBs were reduced to 133 by way of amalgamation as on 2006 and have been further reduced to 102, as on date. 20 The amalgamated RRBs will reap benefits of staff rationalization, increased quantum of advances and investments on the increased capital base and the benefit of larger resources and economies of scale. The following is the state wise list of RRBs in India State wise List of the RRBs: Sr. State Name of the bank 1 Andhra Andhra Pradesh Grameena Vikas Bank Pradesh: Andhra Pragathi Grameena Bank Deccan Grameena Bank. Chaitanya Godavari Grameena Bank Saptagiri Grameena Bank. 2 Arunachal Arunachal Pradesh Rural Bank. Pradesh: 3 Assam: Assam Gramin Vikash Bank Langpi Dehangi Rural Bank 4 Bihar: Madhya Bihar Gramin Bank Bihar Kshetriya Gramin Bank Uttar Bihar Kshetriya Gramin Bank 148

23 Kosi Kshetriya Gramin Bank Samastipur Kshetriya Gramin Bank 5 Chhattisgarh: Chhattisgarh Gramin Bank Surguja Kshetriya Gramin Bank Durg-Rajnandgaon Gramin Bank 6 Gujarat: Dena Gujarat Gramin Bank Baroda Gujarat Gramin Bank Saurashtra Gramin Bank 7 Haryana: Harayana Gramin Bank Gurgaon Gramin Bank 8 Himachal Pradesh: 9 Jammu & Kashmir: Himachal Gramin Bank Parvatiya Gramin Bank Jammu Rural Bank Ellaquai Dehati Bank Kamraz Rural Bank 10 Jharkhand: Jharkhand Gramin Bank Vananchal Gramin Bank 11 Karnataka: Karnataka Vikas Grameena Bank Pragathi Gramin Bank Cauvery Kalpatharu Grameena Bank Krishna Grameena Bank Chimagalur-Kodagu Grameena Bank Visveshvaraya Gramin Bank 12 Kerala: Narmada Malwa Gramin Bank North Malabar Gramin Bank 13 Madhya Pradesh: Narmada Malwa Gramin Bank Satpura Kshetriya Gramin Bank 149

24 Madhya Bharath Gramin Bank Chambal-Gwalior Kshetriya Gramin Bank Rewa-Sidhi Gramin Bank Sharda Gramin Bank Ratlam-Mandsaur Kshetriya Gramin Bank Vidisha Bhopal Kshetriya Gramin Bank Mahakaushal Kshetriya Gramin Bank Jhabua Dhar Kshetriya Gramin Bank 14 Maharashtra: Marathwada Gramin Bank Aurangabad-Jalna Gramin Bank Wainganga Kshetriya Gramin Bank Vidharbha Kshetriya Gramin Bank Solapur Gramin Bank Thane Gramin Bank Ratnagiri-Sindhudurg Gramin Bank 15 Manipur Manipur Rural Bank 16 Meghalaya Ka Bank Nogkyndong Ri Khasi-Jaintia 17 Mizoram Mizoram Rural Bank 18 Nagaland Nagaland Rural Bank 19 Orissa Kalinga Gramya Bank Utkal Gramya Bank Baitarani Gramya Bank Neelachal Gramya Bank Rushikulya Gramya Bank 20 Punjab Punjab Gramin Bank 150

25 Faridkot-Bhatinda Kshetriya Gramin Bank Malwa Gramin Bank 21 Rajasthan Baroda Rajasthan Gramin Bank Marwar Ganganagar Bikaner Gramin Bank Rajasthan Gramin Bank Jaipur Thar Gramin Bank Hodoti Kshetriya Gramin Bank Mewar Anchalik Gramin Bank 22 Tamil Nadu Pandyan Grama Bank Pallavan Grama Bank 23 Tripura Tripura Gramin Bank 24 Uttar Purvanchal Gramin Bank Pradesh Kashi Gomti Samyut Gramin Bank Uttar Pradesh Gramin Bank Shreyas Gramin Bank Lucknow Kshetriya Gramin Bank Ballia Kshetriya Gramin Bank Triveni Kshetriya Gramin Bank Aryavart Gramin Bank Kisan Gramin Bank Kshetriya Kisan Gramin Bank Etawah Kshetriya Gramin Bank Rani Laxmi Bai Kshetriya Gramin Bank Baroda Western Uttar Pradesh Gramin Bank 151

26 Devipatan Kshetriya Gramin Bank Prathama Bank Baroda Eastern Uttar Pradesh Gramin Bank 25 Uttaranchal Uttaranchal Gramin Bank Nainital Almora Kshetriya Gramin Bank 26 West Bangiya Gramin Vikash Bank Bengal Paschim Banga Gramin Bank Uttar Banga Kshetriya Gramin Bank Source: Central Statistical Information Department, NABARD. Table No. 3.01: 3.16Details of RRB Branches up to the year Sr. No. Sponsor Bank Name of the RRB State Allahabad Allahabad UP GB Uttar Pradesh -- Bank 2 Allahabad Lucknow Kshetriya Uttar Pradesh 248 Bank Gramin Bank 3 Allahabad Sharda Gramin Bank Madhya Pradesh 63 Bank 4 Allahabad Triveni Kshetriya GB Uttar Pradesh 223 Bank 5 Andhra Chaitanya Godavari Andhra Pradesh 91 Bank Grameena Bank 6 Andhra Rushikulya Gramya Orissa 80 Bank Bank 7 BOB Baroda Gujarat GB Gujarat BOB Baroda Rajasthan Gramin Bank Rajasthan

27 9 BOB Baroda UP GB Uttar Pradesh BOB Jhuba Dhar KGB Madhya Pradesh BOB Nainital AmoraKshetriya Uttaranchal 58 Gramin Bank 12 BOI Aryavart Gramin Uttar Pradesh 304 Bank 13 BOI Baitarani Gramya Orissa 103 Bank 14 BOI Jharkhand GB Jharkhand BOI Narmada Malwa Madhya Pradesh 212 Gramin Bank 16 BOI Wainganga Krishna Maharashtra 173 Gramin Bank 17 BOM Maharashtra Godavari Maharashtra 77 Gramin Bank 18 BOM Marathwada Gramin Maharashtra 245 Bank 19 BOR ltd Mewar Aanchalik Rajasthan 58 gramin bank 20 Canara Pragathi GB Karnataka 360 Bank 21 Canara Shreyas GB Uttar Pradesh 192 Bank 22 Canara South Malabar GB Kerala 228 Bank 23 CBI Ballia KGB Uttar Pradesh CBI Etawah Kshetriya Uttar Pradesh 51 Gramin Bank 25 CBI Hadoti Kshetriya Rajasthan 84 Gramin 26 CBI Satpura Narmada Madhya Pradesh 346 KGB 27 CBI Surguja KGB Chattisgarh

28 28 CBI Uttar Banga KGB West Bengal CBI Vidharbha KGB Maharashtra CBI Uttar Bihar Gramin Bihar 858 Bank 31 Corporation Chikmagalur Kodagu Karnataka 52 Bank Grameena Bank 32 Dena Bank Dena Gujarat Gramin Gujarat 143 Bank 33 Dena Bank Durg Rajnandgaon Chattisgarh 105 Gramin Bank 34 Indian Pallavan Grama Bank Tamil Nadu 82 Bank 35 Indian Puduvai Bharathiar Puducherry 11 Bank Grama Bank 36 Indian Saptagiri GB Andhra Pradesh 127 Bank 37 IOB Neelachal GB Orissa IOB Pandyan GB Tamil Nadu J&K Bank Jammu & Kashmir GB Jammu & Kashmir J&K Bank Jammu Rural Bank Jammu & Kashmir J&K Bank Kamraz Rural Bank Jammu & Kashmir P&S Bank Sutlej GB Punjab PNB Haryana Gramin Haryana 191 Bank 44 PNB Himachal GB Himachal Pradesh PNB Madhya Bihar Gramin Bihar 407 Bank 46 PNB Punjab Gramin Bank Punjab 155 Source: Central Statistical Information Department, NABARD. 154

29 Table 3.02: Growth of RRBs in India. Sr. No. As at the end of No. of RRBs No. of Branches Source: Central Statistical Information Department, NABARD, June Graph No. 3.01: Total Number of RRBs in India Source: Table No

30 Graph No. 3.02: Total Number of Branches of RRBs in India Source: Table No It is very clear from the table No that the number of RRBs decreased from 196 in the year to 86 in This was due to the amalgamation that took place in the year , with a net work of 14,494 branches. However, the number of branches has been significantly increased from 14,267 in to 15,184 in

31 Table No.3.03: Number of Districts covered during the year to Sr. No. As at the end of No. of District covered Increase / Decrease Source: Central Statistical Information Department, NABARD. Graph No. 3.03: Number of Districts covered during the year to Source: Table No

32 The Table No gives the information about Number of Districts covered during the year to by RRBs The table shows that in the year there was 437 district covered by RRBs is increased up to 616 districts in the year After amalgamation, RRBs have become quite large covering most parts of the State in many cases. Assam Gramin Vikas Bank, an amalgamated RRB, covers 25 districts, the highest in the country, while five other amalgamated RRBs cover 10 or more districts each. However, 40 RRBs covered two districts and 16 RRBs covered a single district each. Increased coverage of districts by RRBs makes them an important segment of the Rural Financial Institutions (RFI) for financial inclusion. Regional Rural Banks were established in India essentially for taking banking to the doorsteps of rural masses, particularly in areas without banking facilities. RRB is a bank for rural poor people; its presence in all the states of country especially in underdeveloped states and union territories is strongly realized. The reason for increasing districts is mainly because of bifurcation and trifurcation of old district in various states. After amalgamation, RRBs have become quite large covering most parts of the states in India. After amalgamation, RRBs have become quite large covering most parts of the states in India. 158

33 Table No. 3.04: Total Capital of RRBs during the year to (Rs. Crores) Sr. Year % Growth Cumulative No. Capital Rs. rate Frequencies , , , , , , , , , , Total Average Source: Central Statistical Information Department, NABARD. Graph No. 3.04: Total Capital of RRBs during the year to (Rs. Crores) 12,000 10,910 10,000 8,733 8,000 6,000 4,000 3,553 3,947 4,059 4,666 5,438 6,181 6,647 7,286 2, Source: Table No

34 Table No shows the total capital of RRBs in India during the year to It is evident from the table that in the year the total capital of RRBs was Rs. 3,553 crores is increased up to 10,910 crores in the year The % of growth rate shows that the Year was & was highest Growth of capital during the ten years period Table No. 3.05: Total Investment of RRBs during the year to Sr. No. Year Investment (Rs. Crores) % Growth rate Average of 5 Years , , , , , , , , , , Source: Central Statistical Information Department, NABARD. 160

35 Graph No. 3.05: Total Investment of RRBs during the year to ,000 65,610 60,000 50,000 40,000 30,000 27,137 30,532 33,063 36,135 36,762 41,182 45,666 48,560 20,000 17,287 10, Source: Table No Investment as a window of deployment of funds was given more emphasis than lending. The year-wise investment made by the banks is presented in Table No The Table shows the total Investment made by the banks during the year to It is evident from the table that in the year the total investments of RRBs was Rs. 17,287 crores is increased up to 65,610 crores in the year The % growth rate shows that during the year is & is was highest growth of investments & in the year was lowest growth rate 1.73 during the ten years period. First 5 years Average Investment was & last 5 years Average was crores. 161

36 Table No. 3.06: Total Loans Outstanding during the year to Sr. Year Loan Outstanding (Rs. No. Crores) % Increase , , , , , , , , , , Source: Central Statistical Information Department, NABARD. Graph No. 3.06: Total Loans Outstanding during the year to Loan Outstanding (Rs.Crores) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, , ,387 18,629 22,158 26, , , , , , Source: Table No

37 The year-wise amount of loans outstanding of the RRBs is presented in Table No The Table shows the total loans outstanding of the banks during the year to It is evident from the table that in the year the total loans outstanding of RRBs was Rs. 13,693 crores is increased up to 67,802 crores in the year The growth ratio shows that near about 495 per cent loan outstanding is increased during the ten years period. Table No. 3.07: Growth of Total Advances of RRBs. during the year to (Rs. Crores) Sr. No. Year Total advances (Rs. Crores) % of growth rate Average of 5 years , , , , , , , , , , Total Average Source: Central Statistical Information Department, NABARD. 163

38 Graph No. 3.07: Growth of Total Advances of RRBs during the year to (Rs. Crores) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 13,237 15,815 18,598 21,755 25,483 31,817 39,713 48,493 58,984 67, Source: Table No The data regarding the total Advances of RRBs were shown in Table No During the ten year period per cent growth rate was highest in was & was lowest % growth rate of Advances was records by the RRBs in the year was First 5 years average was & last 5 years average was Total average of 10 years was In the year the total amount of advanced disbursed by the banks was Rs. 13,237 crores were increased up to Rs. 67,802 crores in the year

39 Table No. 3.08: Growth of Total Deposits of RRBs. during the year to (Rs. Crores) Sr. Year Total deposit No. (Rs. Crores) % Increase , , , , , , , , , ,20, Source: Central Statistical Information Department, NABARD. Graph No. 3.08: Growth of Total Deposits of RRBs. during the year to (Rs. Crores) Source: Table No

40 The data regarding the total deposits of RRBs were shown in Table No During the ten year 339 per cent increase records by the RRBs in the deposits. In the year the total amount of deposits were Rs. 35,426 crores were increased up to Rs. 1,20,189 crores in the year Table No. 3.09: Credit Deposit Ratio of RRBs during the year to (Rs. Crores) Sr. No. Year Total advances (Rs. Crores) Total deposit (Rs. Crores) ,426 (27) (73) (29) (71) (29) (71) (31) (69) (31) (69) (34) (66) (36) (64) (37) (63) (37) (63) ,20,189 (36) (64) Source: Central Statistical Information Department, NABARD. 166

41 Graph No. 3.09: Credit Deposit Ratio of RRBs during the year to (Rs. Crores) Total advances (Rs. Crores) Source: Table No Table No shows the Credit Deposit ratio of RRBs during the year to In the year the credit deposit ratio was 27:73 has changed year by year and in the year it was shows as 36: