Regional Rural Banks

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Context:

Recently, a meeting was held between the finance minister and the heads of banks to discuss various reforms in Regional Rural Banks (RRBs).

Relevance:

GS II: Indian Economy

Dimensions of the Article:

Set up on the recommendations of Narasimhan Committee on Financial Inclusion in 1976.

Can only operate in the areas specified by GOI.
Objective of providing credit to the agricultural and rural regions.
Financial strength and expertise of commercial banks and Grassroot problem awareness of cooperative societies.
CRR and SLR limits apply
CAR — 9%
Not allowed to borrow under the MSF window.

Shareholding:

To provide safety to the savings of customers
To create credit and increase the supply of money
To encourage public confidence in the financial system
To mobilize the savings of public
To increase its network so as to reach every segment of the society
To provide financial services to all customers irrespective of their level of income
To bring in social equity by providing financial services to every stratum of society.

Regional Rural Banks (RRBs) are operating at a higher cost than scheduled commercial banks, and many of their branches are losing money as a result of a lack of business.
They primarily provide government programmes like Direct Benefit Transfer in rural areas. Currently, only 19 RRBs have access to online banking, and only 37 have mobile banking licences.
Only RRBs that maintain a minimum statutory capital to risk-weighted assets ratio (CRAR) of more than 10% are permitted under current legislation to offer internet banking.

-Source: The Hindu