Context:
Union Finance Minister chairs Review Meeting of the Regional Rural Banks (RRBs)
Regional Rural Banks:
- Established in – 1975
- 1st RRB was Prathama Bank in Moradabad, Uttar Pradesh.
- Objectives –
- Provide banking and credit facilities for agriculture and rural sectors.
- Combine features of cooperatives with the professionalism of commercial banks.
- Ownership –
- Central Government – 50%
- State Government – 15%
- Commercial Bank – 35%
- All public sector banks, except Punjab & Sind Bank, sponsor one or more RRBs.
- J&K Bank is the only private sector bank sponsoring an RRB.
- Banking Norms –
- Loans have lower interest rates compared to commercial banks, facilitating easier access to credit for rural people.
- Priority Sector Lending – RRBs must lend at least 60% of their capital to agriculture and other priority sectors like small or medium-sized businesses or housing in rural areas.
Differences between Regional Rural Banks (RRBs) and regular commercial banks:
| Aspect | Regional Rural Banks (RRBs) | Commercial Banks |
| Objective | Primarily aim to provide banking and credit facilities to the agriculture and rural sectors. | Focus on a broader range of financial services for both urban and rural customers, including corporate banking. |
| Ownership | Jointly owned by the Central Government, State Government, and a sponsoring commercial bank. | Can be publicly or privately owned, with ownership structures varying widely. |
| Branch Network | Predominantly have branches in rural and semi-urban areas. | Have a widespread network in both urban and rural areas. |
| Interest Rates | Offer lower interest rates on loans to make credit more accessible to rural populations. | Interest rates are generally higher and vary based on market conditions. |
| Priority Sector Lending | Required to lend a minimum of 60% of their capital to the agriculture sector and other priority sectors. | Also have priority sector lending targets, but these are less stringent compared to RRBs. |
| Services Offered | Focus on providing basic banking services, credit for agriculture, and small-scale industries. | Offer a wide range of services including retail banking, corporate banking, investment services, and more. |
| Financial Inclusion | Play a crucial role in financial inclusion by targeting unbanked and underbanked rural populations. | Also contribute to financial inclusion but have a broader customer base. |
Source: PIB
Previous Year Question
Which one of the following links all the ATMs in India?
[UPSC Civil Service Exam – 2018 Prelims]
(a) Indian Banks’ Association
(b) National Securities Depository Limited
(c) National Payments Corporation of India
(d) Reserve Bank of India
Answer: (c)
