Regional Rural Banks and Their Performance – An Empirical Study

Abstract

Regional Rural Banks (RRBs) are formed to serve the needy rural poor for agricultural and allied activity and non-farm sector capital requirements. It is well known that the lenders are the sufferers from non-recovery of loans lent to wilful defaulters and cheaters. The banking system is the heart of any country’s economy, striving to achieve growth and remain a permanent and dominating factor in the global competitive business environment. The major part of the Indian banking sector, the commercial and scheduled nationalised and private banks, and cooperative banks play a vital role. But this two-tier mechanism faced problems to satisfy the capital needs to the rural mass. To improve the rural credit mechanism and overcome the inadequate situation, led the Government of India to form a committee to find a feasible solution to facilitate easy rural credit satisfying mechanism through RRBs. In particular, the RRBs mainly focus on mobilisation of savings and supply of credit to the rural people. This paper attempts to study the performance of RRBs for the country as a whole for a period of thirteen years (2001- 14). Indicators analysed for critical looks at the RRBs’ performance are the following; No. of RRBs, branches, districts covered, and staff employed (Table 1); sources of funds (owned, borrowed, deposits and total) (Table 4); advances, investments and total applications (Table 7); advances, deposits and CD ratio (Table 9); total sources and total utilisation (Table 10). For the first three Tables mentioned above mean, SD, CV and CAGR are worked out for each indicator. Hypotheses are tested for significance. In the concluding section, suggestions for strengthening the working of RRBs are presented.