Objectives of RRBs

• Credit facilities to the agriculture sector.

• Promote the welfare of economically and
socially backward sections of the population.
• Help the rural artisans and small entrepreneurs
in rural area by providing credit facilities.
• Mobilize deposits of rural people.
• Provide subsidiary services like commercial
banks.
 Review of progress
• Encouragement to rural development.
• Branch expansion.
• Deposit Mobilisation.
• Loan and advances.
 Narasimham committee
• The Narasimham committee has evaluted the
functioning of the RRBs in the following
words:
“ The RRBs have fared well in achieving the
objective of providing access to the weaker
sections of the society of the institutional
credit but the recovery position on the whole
is not satisfactory.”
According to the committee there are three
basic problems:
• On account of many restrictions placed on the
business, they can undertake, the RRBs have low-
earning capacity.
• The wage and salary scales of the RRBs have been
rising.
• The sponsoring banks are also running their own
branches in the very area of operation of the RRBs.
Restructuring of RRBs:
• RRBs are freed from service area obligation.
• They are allowed to increase their non-target
group financing from 40% to 60%.
• They are permitted to reallocate some of their
loss making branches at market yards and
mandis.
• They are given freedom to give loans for non-
priority sectors.
• They are allowed to undertake non-fund
activities.
• They are free to determine interest rates on
deposits and loans.
• They can provide safe deposits.
 Chalapathi rao committee
• The committee divided the present 196 RRBs into
four grades on the basis of their economic
viability and profitability.
• Banks which have been making
(a.) profits during last 3 years and with no
accumulated losses are styled as ‘A’ grade banks.
(b.) Profits for the last 3 years but have
accumulated losses are regard as ‘B’ grade banks.
(c.)Banks which have incurred losses during the
last 3 years are to be called as ‘C’ grade banks.
(d.)Banks incurring losses during last 3years and
accumulated losses exceed 10% of deposit are
regarded as ‘D’ grade banks .
• Banks which have economically strong should
approach the capital market to increase
capital base.
• As apart of reorganization of RRBs the
committee recommended merger of banks
where ever necessary.
• A license from RBI shall be mandatory
branches which was not previously there.
• Banks should also be permitted to undertake
all types of business done by
commericalbanks.