[Answered] How far Regional Rural Banks (RRBs) have been successful in fulfilling the financial needs of agriculture sector and rural economy?

Regional Rural Banks (RRBs) under Regional Rural Banks Act, 1976 are financial institutions which ensure adequate credit for agriculture and other rural sectors. They were set up on the basis of the recommendations of the Narasimham Working Group (1975). The equity of a regional rural bank is held by the Central Government, concerned State Government and the Sponsor Bank in the proportion of 50:15:35.

Regional Rural Banks (RRBs) have been successful in fulfilling the financial needs of agriculture sector and rural economy:

• To make the agriculture sector more profitable and to increase the scope of rural industries, the government included the concept of priority sector. The RRBs are required to provide 75% of their total credit as priority sector lending (PSL).
• RRBs increase employment opportunitiesby encouraging trade and commerce in rural areas.
• RRBs perform various functions such as carrying out government operations like disbursement of wages of MGNREGA workers and distribution of pensions, providing para-banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, and UPI services.
• RRBs provide cheap and liberal credit facilitiesto small and marginal farmers, agriculture labourers, artisans, small entrepreneurs and other weaker sections.
• They act as a catalyst elementand thereby accelerate the economic growth in the particular rural region.

Issues:

• Incurring losses: many of RRBs branches do not have enough business as they focus mainly on offering government’s schemes like direct benefit transfer in the rural areas of the country.
• Regional imbalance: They are concentrating their branches in some specific states and districts & losing other prospective groups of customers.
• Poverty alleviation: Although various efforts have been made in this regard, lack of economic infrastructure, poor marketing strategies, poor knowledge of customers, low production, low awareness about savings have created many hurdles for RRBs.
• Low finance: They are dependent on NABARD to collect finance for their further operation.

RRBs should start some new insurable policies like deposit-linked cattle and other animals’ insurance policies, crop insurance policies, or life insurance policies for the rural depositors.