Embed Size (px)
Citation preview
75
CHAPTER – 4
REGIONAL RURAL BANKS IN INDIA AND PROFILE OF PRAGATHI
GRAMINA BANK
4.1 Introduction
Activities of modern economy are significantly influenced by the functions
and services of banks. Banking sector constitutes the core part of economic system.
Indian economy is an agricultural economy and real India lies in villages. Village
economy is the backbone of Indian economy. Even after 60 years of independence the
rural economy in India is still handicapped in terms of infrastructure and other chronic
problems of cultivators. In fact, economic progress and industrial development are
determined by the rural sector. More than 70% of Indians are dependent on
agriculture; 60% of industries are agro based; 50% of national income is contributed
by rural sector, and the agricultural sector is the largest foreign exchange earner to
India. Without the development of rural economy the objectives of economic planning
cannot be achieved. Hence, banks and other financial institutions are considered to
play a vital role for the development of the rural economy in India.
The Commercial Banks had little interest in rural areas, as these banks
concentrated on deposits rather than credits. Thus they provide for the flight of funds
from the rural to the urban. So, there was a strong need for the establishment of
Regional Rural Banks (RRB).
Rural banking system occupies a significant position in the structure of Indian
banking system. Being an agrarian economy with more than 50% of the population
depending on agriculture for their livelihood, rural banking has acquired increasing
relevance in the recent times. “Rural Banking” will connote the banking need of the
rural population.
These needs are for activities relating to agriculture, rural and cottage
industries which dot the rural settings. The needs of these different segments are
varied and complex. These needs were from ancient times met usually by the village
money lenders, the lending activities of these money lenders operated on an informal
basis without much of the paraphernalia of a modern banking system. But these
money lenders were literally charging exorbitant rates of interest and were engaged in
76
practices not very conducive to the interest of the rural borrowers. Thus came the co-
operative movement during the beginning of 1900’s by enactment of the act in 1904,
which officially launched the movement in India. The co-operative sector could cater
only to the short term credit requirements of the rural borrowers. Hence, in order to
provide a mechanism for a long term lending operations, land mortgage banks
appeared on the scene. These arrangements with all their deficiencies and problems
continued as an institutional support system to the credit needs of the agriculturists
and other person engaged in village and cottage industries.
A notable development in the domain of agricultural financing was the
formation of Agricultural Refinance Corporation on July 1st, 1963. In order to give a
clear focus on the promotional and developmental role played by the corporation, its
name was changed into Agricultural Refinance and Development Corporation
(ARDC). The corporation essentially was a refinancing agency and provided
assistance to those agricultural and developmental projects which could not be
financed by other institutions either because of the large outlay involved or because
the projects could not be brought within the purview of normal rules of business of
these institutions. Its establishment was in recognition of the fact that if commercial
and other institutions were to embark on agricultural lending on a large scale,
refinance have to be provided. With the establishment of National Bank for
Agriculture and Rural Development (NABARD) in July 1982, all the functions of
ARDC have been taken over.
Further, the inadequacy of the system to cater to the rural banking needs
forced Govt. of India to come with the concept of “Social Control” in the year 1967 to
address the problems of rural finance. This experiment was found to be inadequate,
the government came out with the nationalization of banks in 1969 and 1980.
Nationalized banks were exhorted to increase the credit flows to agriculture and other
priority sectors. State Bank of India and other associate banks also took up the lending
to agriculture and priority sectors on a large scale. Several innovative experiments
like service area approach, lead bank scheme were also introduced, mainly with a
view to ensure that the rural financing systems grows in strength. The establishment
of NABARD on July 12th
, 1982 is a land mark in the field of rural finance. This new
significant statutory, financial institution was conceived as the official agency to meet
77
the exclusive demands of the Integrated Rural Development Programme (IRDP), and
exercises a considerable influence on the economy. The Reserve Bank, as the central
bank of the country, is the kernel of the Indian Financial and Monitory System, apart
from performing the traditional central banking and regulatory functions for securing
monitory stability, the bank has over the years taken on an active developmental and
promotional role especially in the area of meeting the needs of rural economic
development. The rural banking structure constitutes the following segments, viz.,
1. Rural Money Lenders,
2. Co-operative Banks,
3. Land Development Banks,
4. Regional Rural Banks,
5. Commercial Banks and
6. National Bank for Agricultural and Rural Development.
4.2 Regional Rural Banks
RRB in India are an integral part of the rural credit structure of the country.
RRBs were established under the provisions of an ordinance promulgated on 26th
Sept. 1975 and the RRB Act, 1976 with an objective to ensure sufficient institutional
credit for agriculture and other rural sectors. The RRBs mobilize financial resources
for rural / semi-urban areas and grant loans and advances mostly to small and
marginal farmers, agricultural labourers and rural artisans. The area of operation of
RRBs is limited to the area as notified by Govt. of India covering one or more
districts in the state.
RRBs are jointly owned by Govt. of India, the concerned State Government
and sponsor banks (i.e., 27 scheduled commercial banks and one state co-operative
bank) of this 50% shall be subscribed by the central government, 15% by the
concerned state government and 35% by the sponsor bank.
Objectives
The objectives of the act are clearly mentioned in the preamble to the act, as
under;
1. To provide cheap credit and other facilities to small and marginal farmers,
land less labourers, artisans and small entrepreneurs engaged in productive
activities.
78
2. To develop the rural economy of the country by providing liberal financial
assistance to agriculture, trade and commerce, industries and other productive
enterprises in rural areas.
3. To inculcate banking habit among the people and mobilize their savings for
accentuating the economic growth of the rural areas.
4. To provide employment to the educated youth of the rural areas.
5. To bring down the cost of rural banking.
Table 4.1
RRBs in India
Sr
No
Name of RRB State Sponsor Bank Dist
Cov
Branches
1 2 3 4 5 6
1 Andhra Pradesh, GVB Andhra Pradesh State Bank of India 8 553
2 Andhra Pragathi GB Andhra Pradesh Syndicate Bank 5 385
3 Chaitanya Godavari GB Andhra Pradesh Andhra Bank 3 105
4 Deccan GB Andhra Pradesh State Bank of
Hyderabad
5 226
5 Saptagiri GB Andhra Pradesh Indian Bank 2 144
6 Arunachal Pradesh RB Arunachal Pradesh State Bank of India 16 22
7 Assam GVB Assam Union Bank of India 25 362
8 Langpai Dehangi GB Assam State Bank of India 2 46
9 Bihar Kshetriya GB Bihar UCO Bank 8 164
10 Madhya Bihar GB Bihar Punjab National Bank 11 421
11 Samastipur KGB Bihar State Bank of India 1 68
12 Uttar Bihar GB Bihar Central Bank of India 18 884
13 Durg Rajnandgaon GB Chhattisgarh Dena Bank 3 112
14 Sarguja Kshetriya GB Chhattisgarh Central Bank of India 2 90
15 Chhattisgarh GB Chhattisgarh State Bank of India 14 266
16 Baroda Gujarat GB Gujarat Bank of Baroda 12 134
17 Dena Gujarat GB Gujarat Dena Bank 7 145
18 Saurashtra GB Gujarat SB State Bank of
Saurashtra
7 167
19 Gurgaon GB Haryana Syndicate Bank 7 186
20 Haryana GB Haryana Punjab National Bank 16 229
21 Himachal GB Himachal Pradesh Punjab National Bank 11 125
22 Parvatiya GB, Chamba Himachal Pradesh State Bank of India 1 33
23 Ellaquai Dehati Bank J & K State Bank of India 13 111
24 J & K GB J & K Jammu & Kashmir
Bank
11 176
79
25 Jharkhand GB Jharkhand Bank of India 15 221
26 Vananchal GB Jharkhand State Bank of India 9 188
27 Cauvery Kalpatharu GB Karnataka State Bank of Mysore 7 215
28 Chikmangalur Kodagu Karnataka Corporation Bank 2 53
29 Karnataka Vikas GB Karnataka Syndicate Bank 9 451
30 Krishna GB Karnataka State Bank of India 3 139
31 Pragathi GB Karnataka Canara Bank 8 368
32 Visveshvaraya GB Karnataka Vijaya Bank 1 30
33 North Malabar GB Kerala Syndicate Bank 7 185
34 South Malabar GB Kerala Canara Bank 8 235
35 Jhabua Dhar K GB Madhya Pradesh Bank of Baroda 3 80
36 Madhya Bharat GB Madhya Pradesh State Bank of India 8 223
37 Mahakaushal KGB Madhya Pradesh UCO Bank 3 43
38 Narmada Malwa GB Madhya Pradesh Bank of India 10 214
39 Rewa Sidhi GB Madhya Pradesh Union Bank of India 3 100
40 Satpura Narmada KGB Madhya Pradesh Central Bank of India 20 348
41 Sharda GB Madhya Pradesh Allahabad Bank 1 63
42 Vidisha Bhopal KGB Madhya Pradesh State Bank of Indore 2 27
43 Maharashtra GB Maharashtra Bank of Maharashtra 16 329
44 Vidharbha KGB Maharashtra Central Bank of India 5 96
45 Wainganga KGB Maharashtra Bank of India 12 182
46 Manipur Rural Bank Manipur Union Bank of India 9 27
47 Meghalaya Rural Bank Meghalaya State Bank of India 6 58
48 Mizoram Rural Bank Mizoram State Bank of India 8 62
49 Nagaland Rural Bank Nagaland State Bank of India 5 8
50 Baitarani Gramya Bank Odisha Bank of India 2 104
51 Kalinga Gramya Odisha UCO Bank 6 183
52 Neelachal Gramya Odisha Indian Overseas 5 174
53 Rushikulya Gramya Odisha Andhra Bank 2 81
54 Utkal Gramya Bank Odisha State Bank of India 15 333
55 Puduvai Bharathiar GB Puducherry Indian Bank 2 26
56 Malwa GB Punjab State Bank of Patiala 5 53
57 Punjab GB Punjab Punjab National Bank 11 178
58 Sutlej GB Punjab Punjab & Sind Bank 6 30
59 Mewar Aanchalik GB Rajasthan Indian Bank 3 58
60 Baroda Rajasthan GB Rajasthan Bank of Baroda 13 175
61 Hadoti GB Rajasthan Central Bank of India 3 84
80
62 Jaipur Thar GB Rajasthan UCO Bank 6 213
63 MGB GB Rajasthan State Bank of Bikaner
& Jaipur
6 218
64 Rajasthan GB Rajasthan Punjab National Bank 5 220
65 Pallavan Grama Bank Tamil Nadu Indian Bank 15 110
66 Pandyan Grama Bank Tamil Nadu Indian Overseas 15 203
67 Tripura GB Tripura Union Bank of India 4 113
68 Allahabad UP GB Uttar Pradesh Allahabad Bank 11 507
69 Aryavart GB Uttar Pradesh Bank of India 7 309
70 Ballia-Etawah GB Uttar Pradesh Central Bank of India 4 139
71 Baroda UP GB Uttar Pradesh Bank of Baroda 14 673
72 Kashi Gomti Samyut Uttar Pradesh Union Bank of India 8 361
73 Kshetriya Kisan GB Uttar Pradesh Corporation Bank 2 63
74 Prathama GB Uttar Pradesh Syndicate Bank 3 212
75 Purvanchal GB Uttar Pradesh State Bank of India 7 380
76 Sarva UP GB Uttar Pradesh Punjab National Bank 14 310
77 Shreyas GB Uttar Pradesh Canara Bank 7 203
78 Nainatal Almora KGB Uttaranchal Bank of Baroda 4 61
79 Uttaranchal GB Uttaranchal State Bank of India 9 142
80 Bangiya GVB West Bengal Union Bank of India 11 552
81 Paschim Banga GB West Bengal UCO Bank 4 216
82 Uttar Banga KGB West Bengal Central Bank of India 3 119
All India Total 620 16001
(Source: Reports of NABARD and RBI.)
From the above table, we can clearly analyze that after amalgamation, RRBs
have become quite large covering most parts of the states. As on 31.03.2011, the
number districts covered by RRBs stands at 620. Assam Gramina Vikas Bank, an
amalgamated RRB, covers 25 districts, the highest in the country. While 23 other
amalgamated RRBs cover 10 or more districts each, 54 other amalgamated RRBs
cover 2 districts or more and 4 RRBs cover a single district. Increased coverage of
districts by RRBs make them an important segment of the Rural Financial Institutions
(RFI) for financial inclusion.
The branch network of 82 amalgamated RRBs as on 31.03.2011 is quite large
and diverse varying from 20 to 884 branches. The Uttar Bihar Gramina Bank has 884
branches, followed by Baroda Uttar Pradesh Gramina Bank with 673 branches. The
branch network of standalone RRBs varies between 8 and 553 branches.
81
4.3 Reform Process of RRBs
RRBs started their development process in the year 1975, the first five RRBs
were setup in five states in Haryana, West Bengal, Rajasthan, with one each and two
in Uttar Pradesh, which were sponsored by different commercial banks. These banks
covered 11 districts of these five states. The first five regional rural banks are;
1.Prathima Gramina Bank and Gorakhpur Kshetriya Gramina Bank in Uttar Pradesh,
2.Haryana Krishi Gramina Bank in Haryana, 3.Gour Gramina Bank in West Bengal,
and 4.Jaipur-Nagpur Anchalik Gramina Bank, Rajasthan.
RRBs were originally conceived as low cost institutions having rural ethos,
local feel and pro-poor focus. However, within a very short time, most banks were
making losses. The original assumptions as to the low cost nature of these institutions
were belied. When the reform process in the banking sector was initiated, RRBs were
taken for a close look. The GOI in consultation with RBI and NABARD started the
reform process through a comprehensive package for RRBs including cleansing their
balance sheets and recapitalizing them. Lending restrictions were removed and
investment of their surplus funds was expanded. Simultaneously, a number of human
resource development programmes and organization development initiatives (ODI)
were taken up by NABARD, with the tools of training and exposure visits, technology
support and use of information technology, computerization, and system development
for business development and productivity improvement. By the year 2008, there was
a remarkable improvement in the financial performance of RRBs as compared to the
position prevailing in the year 1994-95.
The GOI initiated the process of structural consolidation of RRBs by
amalgamating RRBs sponsored by the same bank within a state as per the
recommendations of the Vyas Committee in the year 2004. The amalgamated RRBs
were expected to provide better customer service due to better infrastructure,
computerization of branches, pooling of experienced workforce, publicity - marketing
efforts and also derive the benefits of a large area of operation, enhanced credit
exposure limits and diverse banking activities. As a result of amalgamation the
number of RRBs was reduced 196 to 96 as on 30th
April 2007 and as on 31st March,
2011 there are 82 RRBs functioning in India.
82
4.4 Key Performance Indicators of RRBs in India.
Table 4.2 presents the key performance indicators and growth of RRBs from
year 2006-07 to 2010-2011, Chart 4.1 presents key performance indicators and Chart
4.2 presents growth rate of RRBs.
Table 4.2
Key Performance Indicators of RRBs in India
(Rs. in Crore)
Parameters 2006-07 2007-08 2007-08 2009-10 2010-11 Growth
No. of RRBs 96 91 86 82 82
Profit/Loss Making 81/15 83/8 80/6 79/3 75/7 ---
No. of Branches 14526 14761 15158 15480 16001 3.36
Districts covered 534 594 617 618 620 0.32
Staff 68289 68005 68509 69042 70153 1.61
Owned Fund 7285.98 8732.59 10895.73 12247.16 13838.92 13.00
Deposit 83143.55 99093.46 120184.46 145035.00 166232.34 14.60
Borrowings 9775.80 11494.00 12733.80 18770.00 26490.81 41.10
Investments 45666.14 48559.54 62629.45 79379.16 86510.44 8.98
Gross Loan (O/s) 48492.59 58984.27 67858.48 82819.10 98917.43 19.14
Loan Issued 33043.49 38581.97 43445.59 56079.24 71724.19 27.90
CD Ratio 58.32 59.52 56.46 57.10 59.51 ---
Accumulated
Losses 2759.49 2624.22 2325.59 1775.06 1532.39 - 13.67
Profit (Before Tax) 926.40 1383.68 1859.36 2514.83 2420.75 - 3.74
Loss 301.25 55.58 35.91 5.65 71.32 1162.30
Tax Paid to Govt. 139.66 301.12 461.14 625.25 634.22 1.44
Gross NPA 3178.01 3566.34 2804.02 3084.82 3712.00 20.32
Gross NPA % 6.55 6.05 4.13 3.72 3.75 ---
Net NPA Amount 1625.41 1929.71 1114.54 1423.31 1941.32 36.39
Net NPA % 3.46 3.19 1.68 1.80 2.05 ---
Recovery % 79.80 80.84 77.76 80.09 81.18 ---
Net Worth 4526.48 6107.37 8570.04 10472.10 12306.53 17.52
Branch
Productivity 9.06 10.75 12.41 14.72 16.57 12.57
Staff Productivity 1.93 2.33 2.74 3.70 3.78 2.16
(Source: Reports of NABARD and RBI)
83
Chart 4.1
Key Performance Indicators of RRBs in India
(Source: Reports of NABARD and RBI)
Chart 4.2
Growth Rate of RRBs in India
(Source: Compiled from Reports of NABARD and RBI)
4.5 Sources of Funds
The sources of funds of RRBs comprise of owned fund, deposits, borrowings
from NABARD, Sponsor Banks and other sources including SIDBI and National
Housing Bank.
84
1. Owned Funds
The owned funds of RRBs comprising of share capital, share capital deposits
received from the shareholders and the reserves stood at 13838.92 crore as on 31
March 2011 as against 12247.16 crore as on 31 March 2010; registering a growth of
13.0%. The increase in owned funds to the tune of 1591.76 crore was mainly on
account of accretion to reserves by the profit making RRBs. The share capital and
share capital deposits together amounted to 4273 crore of total owned fund while the
balance amount of 9566 crore represented reserves.
2. Deposits
Deposits of RRBs increased from 145035 crore to 166232.34 crore during the
year registering growth rate of 14.60%. Gurgaon GB reported the highest deposit
growth rate of 37%. There are Sixteen (16) RRBs having deposits of more than 3000
crore each.
3. Borrowings
Borrowings of RRBs increased from 18770 crore as on 31 March 2010 to
26490.81 crore as on 31 March 2011 registering an increase of 41.10% . Borrowings
viz-a-viz the gross loan outstanding constituted 26.8% as against 22.7% in the
previous year.
4.6 Use of Funds
The use of funds of RRBs comprise of investments and loans and advances.
1. Investments
The investment of RRBs increased from 79379.16 crore as on 31 March 2010
to 86510.44 crore as on 31 March 2011 registering an increase of 8.98%. SLR
investments amounted to 45022 crore where as non-SLR investments stood at 41488
crore. The Investment Deposit Ratio (IDR) of RRBs progressively declined over the
years from 72% as on 31.3.2001 to 52.04 % as on 31 March 2011.
2. Loans & Advances
During the year the loans outstanding increased by 16098.33 crore to
98917.43 crore as on 31 March 2011 registering a growth rate of 19.4% over the
previous year. Meghalaya Rural Bank recorded the highest growth rate of 35% during
the year 2010-11.
85
3. Loans Issued
Total loans issued by RRBs during the year increased to 71724.19 crore from
56079.24 crore during the previous year registering a growth of 27.90%. Samastipur
KGB reported highest growth rate of 123% during 2010-11 followed by Andhra
Pradesh GVB at 112%.
4.7 Working Results
1. Profitability
75 RRBs (out of 82 RRBs) have earned profit (before tax) to the extent of
2420.75 crore during the year 2010-2011. The profit was marginally lower than the
previous year. After payment of Income Tax of 634.22 crore, the net profit aggregated
to 1786.53 crore. The remaining 7 RRBs incurred loss to the tune of 71.32 crore.
2. Accumulated Losses
As on 31 March 2011, 23 of the 82 RRBs continued to have accumulated
losses to the tune of 1532.39 crore as against 1775.06 crore (27 RRBs) as on 31
March 2010. The accumulated loss decreased by 242.67 crore during the year under
review.
3. Non-performing Assets (NPA)
The Gross NPA of RRBs stood at 3712 crore as on 31.03.2011 (i.e.3.75%).
The percentage of Net NPA of RRBs has shown an increase from 1.8% to 2.05%
during the year. The data revealed that 15 RRBs had gross NPA percentage of less
than 2%, whereas 33 RRBs had it above 5%.
4. Recovery Performance
There has been an improvement in the recovery percentage during 2009-10
from 80.09% as on 30 June 2009 to 81.18% as on 30 June 2010. The aggregate
overdue, however, increased by 934 crore to 9805 crore as on 30 June 2010.
5. Credit Deposit Ratio
The aggregate CDR of RRBs increased over the years from 57.10% as on 31
March 2010 to 59.51% as on 31 March 2011. Eight of the RRBs reported CDR of
more than 100%.
86
6. Credit Flow to Agriculture
RRBs are actively participating in the credit flow to agriculture sector.
Disbursement of agriculture credit with reference to the total credit for the last 5 years
revealed as under:
Table 4.3
Credit Flow to Agriculture
(Rs. In Crore)
Year Total Credit Agricultural
Credit
% of Agri
Credit to
total credit
% Growth in
Agricultural
Credit Total Credit
2006-07 33,043.49 20,228.11 61 32.22 29.95
2007-08 38,581.97 23,238.69 60 14.88 16.76
2008-09 43,367.13 26,439.17 61 13.77 12.4
2009-10 56,079.24 34,639.94 62 31.02 29.31
2010-11 71,724.19 43,965.43 61 26.92 27.90
(Source:2010-11 Annual Report of PGB)
It may be observed from the above table that the share of agriculture credit to
total credit has hovered around 60-62% during the last five years but in absolute
terms, the agriculture credit has been doubled in 2010-11 from the year 2006-07.
Agriculture credit growth rate has kept pace with the total credit deployment.
7. Productivity of Branch and Staff
The branch productivity increased to 16.57 crore in 2010-11 from 14.72 crore
in 2009-10 with a growth of 12.57%. Similarly, staff productivity in 2010-11
increased to 3.78 crore from 3.70 crore in 2009-10 with a growth of 2.16%.
4.8 Policy Initiatives
1. Capital Infusion for improving CRAR
Consequent upon the decision taken in the Finance Minister’s Review Meeting
of RRBs dated 18.08.2009, a Committee was constituted by Government of India,
Ministry of Finance, Department of Financial Services under the Chairmanship of Dr.
K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, to examine the financials
of RRBs with reference to CRAR and suggest a roadmap for achieving a CRAR of
9% by March 2012. As per Dr. K.C. Chakarbarty Committee Report recapitalization
to 40 selected RRBs in 21 states was started in 2010-11. The recapitalization amount
is to be shared by the stake holders in proportion of their shareholding i.e. 50%, 35%
and 15% by Central Government, concerned sponsor banks and State Government. As
87
per approved scheme, the release of Central Government share is subject to
proportionate share by the Central Government, concerned sponsor banks and State
Government. A sum of 66.49 crore was released to 5 RRBs during 2010-11.
Accepting the recommendations of the committee, the GOI along with other
shareholders decided to recapitalize the RRBs by infusing funds to the extent of 2200
Crore. The implementation is already underway and is expected to be completed
during 2012-13.
2. Technology Innovation through Core Banking Solutions (CBS)
The RRBs were required to ensure that their branches are put on CBS platform
so that they can provide hassle free and any where banking services to their clients. 80
RRBs have since been fully migrated to CBS as on 30m September 2011. NABARD
is providing financial assistance to identified 28 weak RRBs to the extent of 40% for
core banking solution from Financial Inclusion Technology Funds (FITF) and rest of
the cost will be shared by the Sponsor Bank (50%) and the RRB (10%)
3. Financial Inclusion
As envisaged by the Government of India, RRBs as a group have become a
strong intermediary for financial inclusion in rural areas by opening a large number of
“No frills” accounts and by financing under General Credit Card (GCC), as per RBI
guidelines. Total number of accounts stood at 1310.17 lakhs in March 2011 which
was 1188.67 lakhs in March 2010.
Table 4.4
Status of Financial Inclusion
(Rs. In lakh)
Year
Deposit Accounts
Total
loan
a/cs
Of Total, to the Loan Accounts under Priority
Grand total
of business
a/c
(Col.2+4) Total
No
frills GCC SHG KCC
Tena
nt
SSI/arti
san/
SCC &
retail
traders.
2008 758.02 81.17 171.20 2.35 7.20 93.14 1.03 33.53 929.22
2009 935.54 153.81 170.66 3.22 8.04 114.71 0.95 33.00 1107.10
2010 1002.16 200.09 186.67 4.12 8.97 83.72 0.83 24.81 1188.67
2011 1112.30 255.06 197.87 4.59 9.34 90.33 1.09 20.89 1310.17
(Source:2011 Annual Report of PGB)
88
Financial Inclusion Fund (FIF) – Sanction of Research and Development Project on
Financial Inclusion with ICT based solutions by RRBs –
A pilot project on Financial Inclusion with ICT based solution was launched in
year 2009 in 13 selected RRBs, in the country in different regions. The project
envisaged educating and motivating the rural people to use the banking services at
their doorstep. The objective of the project was to ensure timely and adequate credit
to low income groups at an affordable cost, increasing the reach of the banking
services to the excluded segments, and providing the best suited financial services to
the small value customers with an overall reduction of transaction costs. NABARD’s
assistance is extended as back end incentive from the Financial Inclusion Technology
Fund. The deliverable under the project were ;
1. Provide Hardware: Client device, Laptop for enrollment
2. Client Software License: ESE Server Software for Financial Inclusion for 6
months.
3. Server Software License: ESE Server Software for Financial Inclusion for 6
months.
4. Prior to deployment, each RRB to sign the STS Software License and
equipment Sale Agreement to allow for use of each RRB of the client
Software for up to 6 months on the purchased Hardware.
5. Smart Cards: STS to provide to each RRB
i. 1000 client Smart Cards
ii. 20 Operator Smart Cards
6. Impact study, report drafting and final reporting & publications
7. Sharing of learning with suggestions for adopting appropriate model for
further expansion.
The project has been completed and an interim assessment of the project
shows that the ICT based initiative can accelerate the pace of financial inclusion if the
physical connectivity, educating the people on financial literacy and making
technology compatible with the local condition.
4. Village Adoption and Debt Swap
The RRBs were given the target of adopting at least one village per branch, for
financing the indebted farmers to swap the debt taken from moneylenders. RRBs had
89
adopted 31442 villages as at the end of March 2011 and issued loans to the tune of
0.842 crore to 2.08 lakh indebted farmers.
5. Interest Subvention to RRBs
The continuance of the interest subvention scheme was announced in the
Union budget 2010-11. Interest subvention of 1.5% per annum was available to RRBs
for deploying their own funds for crop loan upto Rs.3 lakh per farmer, provided the
ultimate borrower get such loans at 7% interest per annum. An additional subvention
of 2% was announced during the year to those farmers who repaid crop loans
promptly within one year of disbursement. Thus, the interest paid on crop loans by
such farmers was effectively at the rate of 5%. Suitable interest subvention was given
to NABARD for providing concessional refinance to RRBs at 4.5 interest rates.
6. Scheduling of RRBs
Of the 82 RRBs, 80 RRBs now stand scheduled by RBI. The case of
remaining two RRBs will be reviewed after their inspection by NABARD.
7. Interest Subvention to RRBs
The continuance of the interest subvention scheme was announced in the
Union budget 2010-11. Interest subvention of 1.5% per annum was available to RRBs
for deploying their own funds for crop loan up to 3 lakhs per farmer, provided the
ultimate borrower get such loans at 7% interest per annum. An additional subvention
of 2% was announced during the year to those farmers who repaid crop loans
promptly within one year of disbursement. Thus, the interest paid on crop loans by
such farmers was effectively at the rate of 5%.
8. Human Resource Development (Including Training of Officers and Staff
of RRBs)
Consequent upon the amalgamation of RRBs, training requirement of RRB
staff has undergone a change. The banks are now undertaking larger and diversified
lending activities and the volume of their investments has increased significantly.
With the introduction of technology and also the CBS (Core Banking Solutions) they
need training support for adoption of the same so that the customers of RRBs can get
quicker and quality services.
90
NABARD has recognized the capacity building requirement of RRB officials
and conducted 280 programmes in its training establishments for 4832 RRBs officers
on their subject specific necessity with regard to investments, Risk Management,
NPA Management, Credit Appraisal, Business Development, Profit Planning, Internal
Control Systems, Treasury Management etc.,
In addition to NABARD, Sponsor Banks also provide training support to RRB
officers and staff on a continuous basis through their Regional Training Centers to
ensure that the training requirement of the officers/staff of RRBs is adequately met.
4.9 Conclusion
RRBs play a key role as an important vehicle of credit delivery in rural areas
with the objective of credit dispersal to small, marginal farmers & socio economically
weaker section of population for the development of agriculture, trade and industry.
But still its commercial viability has been questioned due to its limited business
flexibility, smaller size of loan & high risk in loans & advances. Rural banks need to
remove lack of transparency in their operation which leads to unequal relationship
between banker and customer, the banking staff should interact more with their
customers to overcome this problem and should open their branches in areas where
customers are not able to avail banking facilities. In this competitive era, RRBs have
to concentrate on speedy, qualitative and secure banking services to retain existing
and attract potential customers.
Therefore, the rapid expansion of RRB has helped in reducing substantially
the regional disparities in respect of banking facilities in India. The efforts made by
RRB in branch expansion, deposit mobilization, rural development and credit
deployment in weaker section of rural areas are appreciable. RRB has successfully
achieved its objectives by taking banking to door steps of rural households,
particularly in banking deprived rural areas, to avail easy and cheaper credit to weaker
rural section who are dependent on private lenders, to encourage rural savings for
productive activities, to generate employment and to bring down the cost of purveying
credit in rural areas. Thus, RRBs are providing the strongest banking network and the
Government should take effective remedial steps to make rural banks viable.
91
Pragathi Gramina Bank
4.10 Introduction
Rural credit policy in India has had at its core the twin goals of bringing an
increasing number of people within the formal financial system and using credit as an
instrument of poverty alleviation. Several measures have been taken by Government
of India and Reserve Bank of India, from time to time to achieve these goals.
Even after commercial banks were brought into the field of rural banking in
the post nationalization scenario, a large segment of the rural population remained
outside the fold of banking services. Therefore, the Govt. of India took a decision to
establish a new set up regionally oriented rural banks, which would combine the local
feel, familiarity characteristic of co-operatives and professionalism and resource base
of commercial banks. Following the recommendations of the committee, Regional
Rural banks (RRBs) were set up first on 2nd October, 1975. Their number went up to
196 by the year 1987.
As enshrined in the Preamble to the RRBs Act, 1976, The RRBs were
established with a view to developing the rural economy by providing, for the purpose
of development of agriculture, trade commerce, industry and other productive
activities in the rural areas, credit and other facilities, particularly to small and
marginal farmers, agricultural labourers, artisans and small entrepreneurs, and for
matters connected there with and incidental there to.
It was in the year 2004, the GOI, decided to consolidate the RRBs into state-
level entities sponsored by same commercial bank and the amalgamation process
began in September, 2005.
4.11 Origin of Pragathi Gramin Bank
The first RRB in South India was established by Canara Bank on 25.01.1976,
by name Tungabhadra Gramin Bank (TGB). Subsequently, Canara Bank established
and sponsored Chitradurga Gramin Bank (CGB), Kolar Gramin Bank (KGB) and
Sahyadri Gramin Bank (SGB) in Karnataka State. All the above mentioned four
RRBs were amalgamated and Pragathi Gramin Bank came into existence on
12.09.2005.
92
Table 4.5
Share Holding Pattern of Pragathi Gramin Bank (Rs. in Crores)
Particulars Govt. of
India
Canara
Bank
Govt. of
Karnataka Total
Share Capital 2.00 1.40 0.6 4.00
Share Capital
Deposit 19.95 13.97 5.99 39.91
Total Capital 21.95 15.37 6.59 43.91
% Holding 50% 35% 15% 100%
(Source: 2005 PGB Annual Report)
The above table indicates, that the total share capital amounts to Rs.4 crore,
share capital deposit amounts to Rs.40 crores approximately and the percentage of
holding comprises of 50% by GOI, 35% by Canara Bank and the rest by the State
Government.
Table 4.6
Bank's Business Position
(Rs. in Crores)
SN Particulars As on
12.09.2005
As on
31.03.2011
1 Total business 2700.54 9162.11
2 Aggregate deposits 1326.49 4812.60
3 Advances o/s 1374.05 4349.51
4 Branches (Nos.) 350 368
5 Owned fund 225.84 522.18
6 Borrowings 273.02 957.90
7 Investments 439.39 2197.35
8 Priority sector advances o/s 1237.98 3861.31
9 Agricultural advances o/s 914.89 3180.28
10 NPA 80.93 170.83
(Source: 2005-11 PGB Annual Report)
From the above table, we can clearly analyze that the owned funds has
increased to 522.18 crore during the year 2011 from 225.84 crores during year 2005.
The total aggregate deposits of the bank has increased to 4812.60 crores from 1326.49
crores. The advances outstanding increased to 4349.51 crores during the year 2011
from 1374.05 crores during the year 2005 and the non-performing assets also
increased to 170.83 crores in the year 2011 from 80.93 crores during the year 2005.
93
Fig.4.1 Organization Structure
The structure of Head Office of PGB at Bellary as shown in the above
organizational chart clearly indicates that the bank is headed by the Chairman and is
assisted by four staff functionaries (General Managers) i.e.,
a. General Manager (1) takes care of the Personnel Wing, Recovery and Risk
Management Wing and Vigilance Cell and also oversees the Regional Offices
at Davangere and Raichur Districts.
b. General Manager (2) takes care of the Credit Wing Financial Inclusion Wing
PS and IT Wing and also oversees the Regional Offices at Overseeing ROs
Bellary and Shimoga Districts.
c. General Manager (3) takes care of the Planning and Development Wing Funds
Management Wing, IC&I Wing and also oversees the Regional Offices at
Kolar and Koppal Districts.
d. General Manager (4) takes care of the DIT HO Annexe at Chitradurga and
also oversees the Regional Offices at Chitradurga District.
Here, all the four functionaries report directly to the Chairman and are
independently responsible for matters relating to their respective departments and
staff.
Personnel Wing
Recovery and Risk
Management Wing
Vigilance Cell
Credit Wing
Financial Inclusion
Wing PS and IT
Wing
Planning and
Development Wing
Funds
Management Wing
IC and I Wing
DIT HO Annexe at
Chitradurga
Overseeing ROs
Davangere
Raichur
Overseeing ROs
Bellary
Shimoga
Overseeing ROs
Kolar
Koppal
Overseeing ROs
Chitradurga
ORGANIZATION STRUCTURE
HEAD OFFICE
BOARD OF DIRECTORS
CHAIRMAN
General Manager
(1)
General Manager
(2)
General Manager
(3)
General Manager
(4)
94
Table 4.7
BOARD OF DIRECTORS
SN Name of The Director Position Nominee Of
1 Sri. M.G. Bhat
Chairman, Pragathi Gramin Bank,
Head Office, No. 32, Sangankal Road,
Gandhinagar, BELLARY – 583103
Chairman Canara Bank
2 Dr. M. Reddaiah,
Asst. General Manager,
RRB & Lead Bank Wing,
Canara Bank, Head Office,
112, J.C. Road, BENGALURU – 560001
Director Canara Bank
3 Sri . B. Jayaramareddy,
Asst. General Manager,
Canara Bank, Circle Office,
IMA House, B N Nagar, HUBLI – 580020
Director Canara Bank
4 Sri. V. Challadurai,
Deputy General Manager,
NABARD Karnataka Regional Office,
Jeevan Prakash Annexe, 113/1, J.C.Road,
BENGALURU – 560002
Director NABARD
5 Sri. V.Srinivas,
Asst. General Manager,
Reserve Bank of India R.P.C.D.
Nrupathunga Road, BENGALURU – 560001
Director Reserve Bank of
India
6 Sri. K Raghuram Bhandary
Special Officer (Banking),
Finance Department (Institutional Finance)
Karnataka Government Secretariat,
M S Building, 5th Stage,
BANGALORE – 560001
Director Govt. Of Karnataka
7 Sri. M. Manjunatha Naik,
Chief Executive Officer, Zilla Panchayath,
BELLARY
Director Govt. Of Karnataka
8 Sri. K Shiva Murthy
M-136, 9th Main, 11th Sector,
LIC Housing Colony, Jeevan Bima Nagar,
BENGALURU – 560075
Director Govt. Of India
9 Sri. Babar Pasha
Badibase, SINDHANUR, Raichur District
Director Govt. Of India
(Source:2011 PGB Annual Report)
4.12 Technology Initiatives in PGB
As per the directions of Government of India and Reserve Bank of India, PGB
has implemented CORE Banking Solutions (CBS) under the guidance of Sponsor
Bank (Canara Bank). The bank is running on 100% core banking platform, and the
technologies adopted in the bank are;
95
ATM
The branch is popularizing among the customers regarding the best services
that could be availed by Pragathi RuPay ATM/Debit card. ATM's offer the
convenience of withdrawing cash, and performing other banking transaction without
having to visit the branch during prefixed business hours and the services offered
through these ATMs are
* Cash Withdrawal
* Balance enquiry
* Mini statement
* PIN Change
RuPay ATM Debit Cards
The ATM debit cards facility i.e., Issue of RuPay ATM Debit cards in
coordination with Canara Bank is provided to all the customers and they can enjoy the
equal status as compared to any other banks with regard to ATM cards.
SMS Alerts
SMS Alerts facility is also available to the customers and they have to walk in
to their respective base branch to register themselves to avail this facility. The
customer will receive regular alerts whenever customer account has been credited or
debited or any other activity according to the customer set specifications directly from
the bank.
SMS Alert services;
* For credit & debit transaction where amount is Rs 5000/- and more.
* For providing daily EOD balance (only when EOD balance changes during the
day).
* To generate alerts when the balance in the account goes below the specified
amount.
* Term Deposit maturity alerts will be sent 5 days in advance.
* Alerts on loan overdue 5 days in advance.
NEFT
National Electronic Funds Transfer (NEFT) is a nation-wide payment system
facilitating one-to-one funds transfer. Under this scheme, individuals can
96
electronically transfer funds from any bank to any individual having an account with
any other bank branch in the country.
The customers make can best use of NEFT, with maximum limit of Rs
50,000/- and the facility is available in all the branches.
RTGS
Real Time Gross Settlement (RTGS), is the continuous (real time) settlement
of funds transfer individually on an order by order basis (without netting). The RTGS
system is primarily meant for large value transactions. The minimum amount to be
remitted through RTGS is Rs 2 lakhs and there is no maximum limit for the same.
Inter Branch Transaction
The customers can make a best use of inter-branch transaction to remit/
withdraw cash at any of the PGB branches without any charges.
4.13 Products & Services
Deposit Schemes
Savings Bank Account
* An account for individuals, non-trading organizations and permitted
institutions.
* Minimum amount: Rs.100/- without cheque book facility (Rs.500/- with
Cheque Book facility)
No Frill Account (Savings Bank Account)
* Basic bank account to all house holds
* Savings account with basic facilities can be opened with an initial deposit of
Rs.10/- or nil balance.
* The objective is to enable under privileged house-holds to have access to
financial, insurance and extension schemes for socio-economic development.
New Nitya Nidhi Deposit
* A Scheme which suits poor and rich alike.
* Collection of daily savings at the door steps.
* No restrictions/ceilings for daily savings.
97
Fixed Deposit
When the customer wants to invest his hard earned money for a longer period
of time and get a regular income, the Fixed Deposit Scheme is ideal with a minimum
investment of Rs.100/- and no ceiling limit on the deposits. The period of deposit
would be for a minimum period of 15 days and to a maximum of 120 months, and the
interest are paid at attractive rates as applicable from time to time either Monthly,
Quarterly, Half-yearly and Yearly depending on the depositor's choice.
Pragathi Tax Saver Deposit (Term Deposit Account)
* Investment upto Rs.1.00 Lakh deductable from Income under Section 80C of
the I.T. Act 1961.
* Scheme is available to individuals/firms/Institutions.
* Fixed period of 5 years and no closure before maturity.
* No loans against the pledge of deposit.
* Not accepted as security/collateral security to any loan.
Kamadhenu Deposit
It is a re-investment plan for the customers who wants to multiply their
money. Apart from safety and liquidity, it offers the customer the highest growth
option, with a minimum investment of Rs.100/- and no ceiling limit on the
investment. The period of deposit would be for minimum period of 05 months and to
a maximum of 120 months, and the interest are paid at attractive rates as applicable
from time to time either Monthly, Quarterly, Half-yearly and Yearly depending on the
depositor's choice. The highlight of this scheme is that the customer can close the
account before maturity and he can avail loan against the deposit made in the bank.
Deposit Scheme for Senior Citizens
Fixed Deposits and Kamadhenu Deposits
Bank offers 0.5% more interest to the customers on the above deposit
schemes.
The scheme is meant for senior citizens, who wants to invest their hard earned
money and get a regular income, the Fixed Deposit Scheme is ideal with a minimum
investment of Rs.50/- and multiples of Rs.50/- and no ceiling limit on the deposits
98
with high returns applicable from time to time. The customer can close the account
before maturity and can avail loan against the deposits that is permissible.
Agriculture - Investment Finance
Horticulture / Plantation Loan
The Purpose of the said loan is to grow/maintain horticulture crops & develop
plantation crop and is eligible to those land holders having sufficient knowledge and
interest in horticulture, with irrigation facility.
Minor Irrigation and Pump Set Loan
The Purpose of the said loan is for installation of pump sets, submersible
pump sets, pipe lines and generators and the person eligible should have minimum 2
acres of compact land.
Vehicle Loans to Agriculturists
The Purpose of this loan is for purchases of new, two wheelers, three
wheelers, jeep and agriculture produce carriers.
Loans to Purchase Tractor, Power Tillers, Thresher and Agricultural Implements
The purpose of the loan is to purchase tractors, power tillers, crop and grains
threshers, and pesticide sprinklers and other machines / implements useful to
agriculture.
Sericulture Loan
The purpose of the loan is for mulberry crop, cocoon rearing, construction of
sericulture rearing house and purchase of equipments.
Dairy Loans
The purpose of this loan is to purchase cross breed cows, buffaloes,
construction of cow shed and grass cutting machines.
Agriculture Godown Loans
The purpose of the said loan is for storing agricultural produce in scientific
manner and to store the produce till the farmer gets good price for the produce.
99
Loan for Purchase of Agriculture Land
The purpose of this loan is;
* to make the small and marginal holdings economically viable.
* to bring fallow lands and wastelands under cultivation.
* to set-up agricultural production and productivity.
* to finance share croppers / tenant farmers to purchase land to enable them to
increase their income.
Agriculture - Production & Marketing Finance
It is meant for all farmers i.e., Individuals / Joint borrowers who are owner
cultivators, Tenant Farmers, Oral Lessees & Share Croppers.
Gold Loans against Pledge of Gold Jewellery
Gold loans will be given to the customers (farmers) against pledging of gold
jewellery.
Pledge Loans / Loans on Ware House Receipt
The loans will be provided to farmers to store their agricultural produce till
they get good price for the produce and to avoid distress sale.
MSME - Investment & Working Capital
PRAGATHI UDYAM
The Individual professionals, proprietorship/partnership firms and / or
companies floated by the professionals like Chartered Accounts, Engineers,
Construction Contractors, Surveyors, cost Accountants, Lawyers or Solicitors,
management Consultants, Journalists, cameramen, Beauty Parlors or a person trained
in any other art or craft, advances could be considered for the purpose of purchasing
equipment, machinery repairing or renovating the existing equipment and/or acquiring
and repairing business premises or for purchasing tools, vehicles, durable utility
articles/and/or working capital requirements, relating to the profession / activity only.
a) The scheme is more customer friendly.
b) The scheme gives special consideration to those retailers and SSI units, who
are not in a position to maintain detailed stock books and submit stock
statements on monthly basis.
100
c) Secured overdraft up to Rs.3.00 lakh against the combined security of stock,
collateral securities and mortgage of land property is permitted and
d) Relaxation given for submission of stock statements/verification of stocks at
longer intervals.
Pragathi Vyapar
The Individuals, Businessmen, Traders, including SSI units, Proprietorship/
Partnership Firms, Companies floated by the persons / group of persons, commission
agents and business enterprises established mainly for the purpose of providing any
other services other than professional services. The purpose is to meet working capital
requirements of Trading and Business Enterprises, including SSI units.
Pragathi Doctor’s Choice
The said loan will be provided to the qualified medical practitioners to meet
the working capital and term loan requirements.
Personal Banking
Gold Loans against Pledge of Gold Jewellery
The purpose of the said loan is for the Business and consumption.
Vidyasagar Education Loan
The Purpose of loan is for pursuing professional, graduation and higher
education within as well as outside India. The said loan is granted only to Indian
Nationals, the parent/guardian of the student should be a permanent resident of the
area of operation of the Bank and for study abroad, only graduate and higher level
studies in colleges/universities/ educational institutions outside India are eligible.
Pragathi Sneha
This loan is availed by all confirmed employees of reputed Public Sector
Undertakings, Central/ State / Semi-Government bodies, Corporations, Private
Companies, whose salary is being disbursed through the bank or against undertaking
by the employer to remit the loan installments of their employees in a single cheque
who avail loans by deducting the installment amount out of their monthly salary for
the credit of loan account of the concerned employee.
101
Pragathi Mobile
This loan is meant for purchase of brand new/used four wheelers and all
individual borrowers including professionals and reputed firms/ company are eligible.
Pragathi Chaya
The individuals who are engaged in income generating productive activities
like trading, business, agriculture, salaried individuals confirmed in the service, self
employed persons like Medical Practitioners, Engineers, Architects, Chartered
Accountants and others, and the age of the borrower should not be more than 55 years
at the time of availing the loan.
Pragathi Mortgage Loan
The purpose is to provide loans against the security of mortgage of residential
& commercial building to the professionals, businessmen, salaried persons,
agriculturists, individuals for meeting genuine needs like marriage, education and
hospitalization expenses.
Loans against approved Securities
a. Loans against LIC Policies
The policies standing in the name of the borrower and policies with fixed
maturity and are assignable.
b. Loans against National Savings Certificates / Kisan Vikas Patra.
The NSCs / KVPs standing in the name of applicant only will be considered.
Individuals, Firms & Companies are also eligible.
1 AGRICULTURE – PRIORITY
1 KCC / PKSCC ( Crop production)
2. Gold Loan –AGL / AGLOD
A) For Crop Production
B) Allied Activities & other purposes
3. Farm Mechanization
a) Tractors/ Power Tillers (Brand new)
b) Combine Harvesters/Power Threshers / Sprayers
102
4. Agri. Term Loan
5. ALHV (Two /Four wheelers / Heavy vehicles – Except Cars)
6. Kisan OD
7. Pledge Loan- Agriculturists (Commodities stored in state /Central Ware houses )
8. Pledge Loan-Agriculturists (Other than above - Sl. No. 7of I)
II NON-AGRICULTURE – PRIORITY
1 Short Term Loan / Term Loan
2 Gold Loan for Business purpose
3 DIR
4 Education Loan
5 Pledge Loan –Traders (Commodities stored in State / Central Ware houses)
6 Pledge Loan-Traders (other than above- Sl. No 5 of II)
7 Self Help Group (SHG)
8 E-Halli scheme
Women SHGs
Women Beneficiaries
9 Swarojgar Credit Cards (SCCs)
10 General Credit Cards (GCCs)
11 Handloom weavers Group (HWGs)
12 Pragathi Saral Suvidha
13 Rajiv Gandhi Rural Housing
14 Pragathi Chhaya ( Housing Finance)
15 Solar Lighting
III LENDING SCHEMES OF THE BANK
1 Pragathi Sneha - (For salaried class including Teachers / Non teaching profession)
2 Pragathi Udyam
3 Vehicle Loan (LHV - 2 wheelers) (For personal use)
4 Pragathi Mobile (PMBL - 4 wheelers) (For personal use)
6 Pragathi Doctors’ Choice
7 Pragathi Mortgage Loan
8 Loans against approved securities
9 Pragathi Carry/ DUAL to customers
10 Pragathi site
103
IV NON- PRIORITY
1 Clean OD / DPN
2 Term Loan
3 Commercial Complex/Commercial Real Estate
4 Premises Loan
5 Gold Loan
6 CDB/BE/Supply Bills
V Others - Only for outstanding accounts (No fresh finance under these schemes)
PRIORITY
1 Krishi Shramik Kalyana Yojana
2 Saral Krishik OD
3 Recharging of Bore Wells
4 Saral Vyavahar Scheme
NON-PRIORITY
1 Computer Loan
2 Sahyadri Tatkala Sala Yojana
VI Staff ECOD & ECDPN
(Source: PGB Annual Report)
Services
Life Insurance Schemes is also marketed by all the branches. Life insurance
coverage is one of the integral components of the Financial Inclusions. Life insurance
products not only provide social security to the insured but also enable to use the
same as a saving cum wealth creation tool.
The Bank has entered into Life Insurance Business as a corporate agent of
Canara HSBC and OBC Life Insurance Company Ltd., (Corporate Office, Gurgaon).
Unique Selling Proposition
Limited Premium Paying Term: This plan has a limited premium paying term of 10
years, with a benefit term of 15 years.
Addition: The product offers sum assured additions as a percentage of the sum
assured. 1st such addition will be accrued at the policy commencement date.
Subsequent additions will be accrued each time the premium is paid.
Increase in Benefits: Guaranteed Benefits increases with each SA Additions till the
Premium Paying Term.
104
Non - Life Insurance
The bank has also entered into Non-Life Insurance as a corporate agent with
United India Insurance Company Ltd.
The assets are held as security to the bank finance and are to be adequately
covered under Insurance. Such as livestock, Vehicles, machineries, building and
Stock in trade.
Safe Deposit Lockers
The Bank offers a safe, trustworthy space to the customers to store their
valuables, jewellery, documents and other things.
Solvency Certificates
Solvency Certificates are issued at the request of the customers of the bank for
submission to Govt. departments or other organizations for considering tender
applications or for similar other purposes.
Capability Certificate
Parties approaching the bank to issue capability certificate for submission to
government departments or to other Organizations for considering tender application,
for execution of contract or for similar other purposes.
Social Banking
Inclusive Growth and Financial Inclusion
The Indian economy is growing at a steady rate of 8.5% to 9%. Most of the
growth is from industry and services sector. Agriculture is growing at a little over 2%.
The potential for growth in the primary and SME (Small and Micro Enterprises)
sector is enormous. Poverty and gender Issues are still haunting development process.
Limited access to affordable financial services such as savings, loan,
remittance and insurance services by the vast majority of the population in the rural
areas and unorganized sector is believed to be acting as a constraint to the growth
impetus in these sectors.
For inclusive growth, hence, there is a need to create opportunities to access
affordable financial services - especially credit and insurance. Financial Inclusion
105
(FI), enlarges livelihood opportunities and empowers the poor to take charge of their
lives. Such empowerment aids social political stability.
Hence, Financial Inclusion is considered to be critical for achieving inclusive
growth: which itself is required for ensuring overall sustainable overall growth in the
country.
Realizing the need for an inclusive growth, the Government of India and RBI
have taken up a number of initiatives for covering the gaps in financial inclusion. It
has propounded
a) Business Facilitator
b) Business Correspondents model to bring the Institutional finance
providers such as Banks and Insurance companies with the large
sections of the society who are financially excluded.
4.14 Financial Exclusion and Consequences
Financial exclusion leads to non accessibility, non-affordability and non-
availability of financial products. Limited access to funds in an under developed
financial system restricts the availability of their own funds to individuals and also
leads to high cost credit from informal sources such as moneylenders. Due to lack of
access to a bank account and remittance facilities, the individual pays higher charges
for basic financial transactions. Absence of bank account also leads to security threat
and loss of interest by holding cash, all these impose real costs on individuals.
Prolonged and persistent deprivation of banking services to a large segment of the
population leads to a decline in investment and has the potential to fuel social tensions
causing social exclusion. Thus, financial inclusion is an explicit strategy for
accelerated economic growth and is considered to be critical for achieving inclusive
growth in the country.
Financial Education
Financial education is the process by which financial consumers / investors
improve their understanding of financial products and concepts and, through
Information, instruction and/or objective advice, develop the skills and confidence to
become more aware of financial risks and opportunities, to make informed choices, to
know where to go for help, and to take other effective actions to improve their
financial well-being.
106
Components of Financial Inclusion
The implementation of Fl Plan does not end with mere opening of No frills
accounts, it involves providing of schemes/services to the smart cards holders, as
advised in the Plan guidelines communicated to Banks by RBI. Accordingly, the
following are essential components of Fl schemes / services that are to be extended to
the smart card customers.
Savings Product-No Frills Account.
Credit Facility - Inbuilt overdraft facility for the No Frills accounts, A KCC or
GCC to each household.
* Remittance and Funds transfer facility.
* Micro insurance products.
* Financial Literacy and Education
Implementation of FI Plan for the year 2010-11
As per the directives of Government of India Banks are advised to cover
villages with population ranging Between 1000-2000 and 1600-2000 population , on
priority basis.
Out of 733 villages allotted to PGB, 206 villages are in the population range of
1600-2000.
Table 4.8
Implementation of FI Plan for the year 2010-11
Serial
No. District Name
Total No. of villages
to be covered Branches Panchayats
1 BELLARY 83 38 54
2 CHITRADURGA 160 51 84
3 DAVANAGERE 72 34 50
4 CHIKKABALLAPURA 61 30 40
5 KOLAR 61 30 38
6 KOPPAL 86 45 51
7 RAICHUR 164 34 75
8 SHIMOGA 46 15 30
*** TOTAL 733 277 422
(Source:2010-11 PGB Annual Report)
107
Rural Development
In addition to extending banking facilities, the bank provides services in crop
insurance coverage, NREG, Social Security Pension payments and Non Life
Insurance Products.
a. Joint Liability Groups
To help the rural poor small and marginal farmers, tenant farmers and oral
lessees, share cropper, entrepreneurs engaged in various types of activities, who do
not have proper land records for availing loan, the bank has formed Joint liability
groups and issues loans to the groups for growing crops and other allied activities .
b. Farmers Club
Farmers Club is a forum of farmers to effectively convey the issues/problems
of the farming community/village to departments concerned and to find solution. The
basic objectives of Farmers Club are as below
* To have contact with new markets, companies for marketing agricultural
produce for good price.
* To create awareness among farmers about new and innovative method of
farming, post harvesting management of produce, marketing, water
conservation, for better productivity and profitability.
* To enlighten the members about new policies of the government, like storage,
marketing, exports.
* To educate the villagers/farmers on various matters by arranging meets,
seminar and exposure visits.
* To educate the farmers/villagers to utilize the bank loan for productive
purpose and to repay the bank loan within due date.
* To create awareness among the farmers about social evils like untouchability,
communalism, atrocity on women, child labour, bonded labour and dowry
system.
c. Financial Literacy
The bank is in the process of involving farmers in conducting financial literacy
camps to educate rural clientele about banking and for inculcating banking habits
among them, such as Literacy Camps, Sneha Sethu, Farmers meet, are few such
initiatives.
108
d. Money Lender Free Villages
The bank is voluntarily pursuing the objective of freeing the indebted
households from the clutches of the private money lenders. The basic credit needs are
met by the bank to avoid approaching money lenders.
e. Providing Self Employment Training to Rural Youth
The bank has joined hands with the Sponsor Bank to sponsor Rural Self
employment Training Institution, to provide training to rural youth in vocational /
income generating activities.
f. Development of Weaker Sections
The bank disburses loans to Small and Marginal Farmers, Women, Minorities,
SCs / STs, Weaker Sections for their development.
g. Smart Card
The banking through Information Communication Technology (ICT) Solution
has implemented SMART Card - based Banking to MGNREG beneficiaries.
h. Insurance Cover on Deposits
All deposits made by the customers are covered under Deposit Insurance
Scheme of Deposit Insurance and Credit Guarantee Corporation (DICGC). Hence, all
deposits of the bank's customers are safe and secure.
i. Banking Ombudsman Scheme
The prime objective is to improve/strengthen the relationship between banker
and customer by providing quick and inexpensive redressal of customer complaints
relating to deficiencies in Banking services.
j. Vigilance Setup in the Bank
The bank comes under the purview of the Central Vigilance Commissioner
(CVC). The Chief Vigilance Officer (CVO) of Sponsor Bank monitors the Vigilance
functions of the Bank. The vigilance cell works under the supervision of a General
Manager of the bank who is designated as Vigilance Officer (VO).
109
References
1. Government of India Notification Dated: 01.06.2006.
2. Annual Report of Pragathi Gramina Bank, Published by Head Office, Bellary,
2005-06.
3. Annual Report of Pragathi Gramina Bank, Published by Head Office, Bellary,
2006-07.
4. Annual Report of Pragathi Gramina Bank, Published by Head Office, Bellary,
2007-08.
5. Annual Report of Pragathi Gramina Bank, Published by Head Office, Bellary,
2008-09.
6. Annual Report of Pragathi Gramina Bank, Published by Head Office, Bellary,
2009-10.
7. Annual Report of Pragathi Gramina Bank, Published by Head Office, Bellary,
2010-11.
Websites:
8. www.pragathibank.com
9. www.reservebankofindia.com
10. www.regionalruralbanks.com
11. www.nabard.com
12. www.indianeconomicreport.com
