A STUDY ON THE ROLE OF REGIONAL RURAL BANKS IN PROMOTING SELF HELP GROUPS

Regional Rural Banks were created with the prime intention of providing banking and financial services to people living in rural areas. As per 2011 census report, rural India accommodates 833 million population, constituting almost 69% of the total population. Despite the fact that many developmental programmes initiated by the government from almost seven decades, have brought about considerable changes in the rural infrastructure and rural lives, a lot more to be achieved. It is pathetic to notice that, even now, many villages lacks basic infrastructural facilities. For instance, Department of Power, Government of India, in it’s report published on 31st March 2011, states that, out of 6,40,268 villages in the country, 5,39,163 villages have been provided with electricity connection so far. It constitutes 84% of the villages. This information narrates that, still 16% of the villages i.e., 1,01,105 villages doesnot have electricity connection at all. This means that about 400 million people in rural areas face the challenge of access to electricity and modern energy services. This has adversely affected the economic productivity of the people, forcing them to rely on unsustainable use of available bio-mass resources. The energy situation in rural India, further gets aggravated by poor quality fuels, unreliable supply, inefficient use of available sources and limited access to reliable sources of electricity. This information is only a tip of the ice berg of the numerous problems which are persistent in the rural set up. Availability of loans and other financial services was very difficult and next to impossibility. To address this issue government of India has nationalized 14 commercial banks in 1969. The nationalization of the banks in 1969 boosted the confidence of the public in the Banking system of the country. However, in the early 1970s, there was a strong feeling that even after nationalization, there were many cultural issues, which made it difficult for commercial banks, even under government ownership, to lend to farmers and the priority sector. This issue was taken up by the government and it set up Narasimham Working Group in 1975. On the basis of this committee’s recommendations, a Regional Rural Banks Ordinance was promulgated in September 1975, which was replaced by the Regional Rural Banks Act 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors. As a result the development process of RRB’s started on 2nd October 1975 with the forming of the first RRB in the country, the Prathama Bank with authorised capital of Rs.5 crore at its starting. Also on 2nd October 1975, five regional rural banks were set up with a total authorised capital Rs.100 crore ($10 Million) which later augmented to 500 crore ($50 million). The Regional Rural Banks were owned by the Central Government, the State Government and the Sponsor Bank (Any commercial bank can sponsor the regional rural banks) who held shares in the ratios of Central Government : 50%, State Government : 15% and Sponsor Banks : 35%.

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