Regional Rural Banks (RRBs) were established in 1975 under the provisions of the Ordinance promulgated on the 26th September 1975 and followed by Regional Rural Banks Act, 1976 with the aim of developing rural economy in all areas like 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, etc.
Some Facts about RRBs:
- RRBs were set up on the recommendations of the Narasimham Working Group.
- The first RRB to be set up was the Prathama Bank, sponsored by Syndicate Bank on October 2, 1975 in Uttar Pradesh. The head office is at Moradabad, UP.
- At that time, Mrs Indira Gandhi was the Prime Minister of India.
- The regulatory authority of these RRBs is NABARD.
- All the RRBs are on Core Banking platform like other commercial banks.
- The area of operation of the RRBs is limited to few districts in a State.
- The percentage shares of the Government of India, the concerned State Government and the bank, which had sponsored the RRB is in the proportion of 50%, 15% and 35%.
- Sponsor bank can be any Nationalized Commercial Bank.
- The sources of funds of RRBs comprise of owned fund, deposits, borrowings from NABARD, Sponsor Banks and other sources including SIDBI and National Housing Bank.
- RBI has allowed the RRBs to maintain a lower level of SLR than commercial banks.
- The Chakrabarty Committee reviewed the financial position of all RRBs in 2010 and recommended for recapitalization.
- Under the Dr Vyas Committee Recommendations, amalgamation of RRBs took place in 2013.
- As a result of amalgamation, number of the RRBs reduced from 196 to 64 as on 31 March 2013.
- All states in India have RRBs, except Sikkim and Goa.