Rural banking

Submitted to Submitted by
Dr. Sonali Kale Ma’am Rajkumar Rakesh Sharma(Roll No-32)
 Table of content
1. Introduction Rural banking
2. Objectives Rural banking
3. Functions Rural banking
4. Role of Rural banking in Rural Development
5. Regulation of the Regional Rural Banks in India
6. Importance of Regional Rural Banks
7. Ownership and Sponsorship
8. Conclusion
 Introduction
• Rural banking refers to providing banking services to individuals
living in rural areas. Rural banking has become integral to the Indian
financial markets with a majority of Indian population still living in
rural or semi-urban areas
• Regional Rural Banks are government owned scheduled commercial
banks of India that operate at regional level in different states of India.
These banks are under the ownership of Ministry of Finance,
Government of India. They were created to serve rural areas with basic
banking and financial services.
• The RBBs Act has made various provisions regarding the
incorporation, regulation and working of RRBs. According to this Act,
the RRBs are to be set-up mainly with a view to develop rural
economy by providing credit facilities for the purpose of development
of agriculture, trade, commerce, industry and other productive
activities in the rural areas.
 Objectives
The objective of regional rural banks is to develop the rural economy by providing credit and other facilities for
agriculture and other productive activities in rural areas. They provide these facilities to small and marginal farmers,
rural artisans, agricultural laborer's and other small entrepreneurs working in the rural areas.
The objectives of RRBs can be summarized as follows:
• To provide loan for backward class public
• To opening branches of bank in rural areas.
• To save the rural poor from the moneylenders.
• To cultivate the banking habits among the rural people and mobilize savings for the economic development of rural
areas.
• To increase employment opportunities by encouraging trade and commerce in rural areas.
• To encourage entrepreneurship in rural areas.
• To cater to the needs of the backward areas which are not covered by the other efforts of the Government?
• To develop underdeveloped regions and thereby strive to remove economic dispar­ity between regions.
 Functions
Since a Regional Rural Bank is a Scheduled Commercial
Bank, its primary functions are to accept deposits and to
disburse loans. The important functions of Regional Rural
Banks are discussed below. 

1. Accept Deposits
2. Loan Extension
3. Secondary functions of RRBs
• Similar to commercial banks, the secondary functions of the Regional Rural Banks in
India are providing agency services and general utility services to their customers. 
• Agency services like foreign exchange, bill payments, money wire transfer, etc. are
performed by RRBs.
• Utility services like ATM, UPI, issuance of debit cards, locker facilities, etc. are also
provided by RRBs in India.
Role of Rural banking in Rural Development
 Importance of Rural Banks
1. Reduce rural and urban gap
Reduce rural and urban gap by mobilizing financial resources and services to rural regions. 

2. Inclusion of the marginal population

Regional Rural Banks pave the way for inclusion of the marginal population like small farmers, Below
Poverty Line (BPL) farmers and workers, small entrepreneurs, artisans, women, etc.

3. growth of agriculture
Providing assistance like loans, advances, insurance to agriculturists for farming inputs, equipment,
processing, marketing activities, and cooperative societies helps in the growth of agriculture and the
advancement of farmers.
 Importance of Rural Banks
4. protect the interests
Many public and private sector banks do not deal with farmers and rural section
due to their small financial needs, fewer incomes, etc. In such a case, there is a
need for a separate banking system to protect the interests of these sectors.
5. dependence on traditional sources
RRBs reduce farmers’ and the weaker sections’ dependence on traditional
sources like moneylenders who exploited them with a high rate of interests on
loans. 
 Regulation of the Regional Rural Banks in
India
1) Reserve Bank of India: The RBI Act 1934 and the Banking Regulation Act 1949 are two
principal regulating statutes for commercial banks in India.
2) NABARD: It stands for National Bank for Agricultural and Rural Development of India is the
chief body for regulating rural banking sector in India.
• It was established on July 12, 1982, by the RBI with an objective to improve the credit flow
concentrated in the urban areas to the rural and semi-urban areas of India.
• Its major functions are monitoring, policy making, planning the activities and credit system of the
rural banks. 
• NABARD also helps rural banks in their development and supervises their activities on a timely
basis.
 Ownership and Sponsorship

The ownership of shares of Regional Rural Banks in

India is divided among the Central Government, State
government, and the sponsoring banks:

• Central Government- 50%

• Sponsor banks- 35%
• State government- 15%

The sponsor bank helps the growth of an RRB by providing trainings to the staff of an
RRB, providing management consultations to the bank for a minimum period of 5 years.
 CONCLUSION

Rural development plays a major role in the development of the global

economy. Rural banks/branches are expected to play a key role in providing
banking services to meet the expected increase in their customers in rural
areas. But the position of Rural Banking in India is not encouraging at all.
There is a need to introduce new models in product design and delivery
systems by making better use of technology and related processes to reach
all rural people. The provision of various financial products and services in
rural areas will improve the income of banks and contribute to the
development of rural areas.
Thank you