ON

SUBMITTED TO KURUKSHETRA UNIVERSITY KURUKSHETRA IN THE PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF BECHLOR OF COMMERCE-III (SESSION-2010-2011)

SUBMITTED TO SUBMITTED BYMS. Nidhi Malhotra Sonia (Lecturer) (B.com - III)

D.A.V COLLEGE FOR GIRLS, YAMUNA NAGAR

Acknowledgement

There is always sense of gratitude which one express to other for the helpful and ready service they render during all the work at life. I great fully acknowledge the inspiration, encouragement, guidance, help and valuable suggestion from the following well - wishers.

I also wish to thank Dr. Sushma Arya (principal) and Ms. Nidhi Malhotra (lecturer) without whom it would not have been possible for me to complete my project successfully.

I shall be failing in my duties is I do not express my thanks to other faculty member and friends for their useful help at various stages. Last but not the least I would like to thank the almighty god for the entire blessing during the project.

Sonia B.com- III (B.B.I)

Preface

The provision of formal financial services in rural India has traditionally been the domain of government-owned financial institutions. Even in the mid-1990s, public sector institutions owned over 90% of the assets of the banking sector. Some 65% of the small loans sector is accounted for by public sector Regional Rural Banks and the small number of private and foreign banks have shown virtually no interest in the rural sector.

A study by Economic Development Associates and Micro-Credit Ratings International Ltd for the Livelihood Options study sampled a total of 5 RRBs, three in a healthy financial condition, and two less so, one of which was located in a remote area. It sought to assess how far the apparent tension between coverage (especially of poorer clients) and financial viability was a real one.

Overall, the crucial ingredient is the quality of branch management: managers have considerable latitude to adjust products to the local market, to take decisions independently of head office, to engage staff in decision-making and so on. Profitability is very strongly correlated with proactive and well-judged management, and it is in only two of the five RRBs surveyed that these qualities Were observed. Programmes of capacity building and motivation among managers are likely to generate high returns.

Declaration

I here by declare that this project report has been personally made by me. The information given is correct & the matter has not been copied from any report of this year or of previous year. In case of any discrepancy or false information found in this report, I shall be personally responsible for it.

SONIA B.com. III (B.B.I)

Contents

Chapter-1 - INTRODUCTION TO BANKING - INTRODUCTION TO REGIONAL RURAL BANKS

Chapter-2 - COMPANY PROFILE

Chapter -3 - OBJECTIVE AND SCOPE

Chapter - 4 - RESEARCH METHODOLOGY

Chapter - 5 - DATA ANALYSIS AND INTERPRETATION

Chapter - 6 - FINDINGS AND CONCLUSIONS

Chapter - 7 - SUGGESTIONS & RECOMMENDATIONS

BIBLIOGRAPHY QUATIONERIES

Introduction to banking

Banking is the life line of an economy. They are the catalytic agent and in the drivers seat of the financial system. The importants of banks in the process of economy development has been stressed from time to time by the economic thinkers, Progressive bankers in the country. Banks play a very important role in our economy in fact it is difficult to imagine how our economy system could function efficiently without many of their services. They are the heart of our financial structure.

Evolution of Banking:

Banking in India originated in the last decades of the 18 century The first banks were the general bank of India which started in 1786, and the bank of Hindustan both of which are now defunct. The oldest bank in existence in India is the State bank of India, which originated in the bank of Calcutta in june 1806, which almost immediately become the bank of Bengal.

This was one of the three presidency banks, the other two being the bank of Bombay and bank of madras, all three of which were established under charters from the british east india Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Banking dates back to 1786, the first bank established in India, than the nationalization of banks in 1969, and recently the liberalization of the same since 1931.

What is Bank :

The public and lent money. Banks play a very important role In our economic,. In simple terms bank refers to an institution which deals in money. In other words bank is an institution which accept deposits withdrawal by cheque and makes loans and advances for the purpose of earning profits. Banking has become foundation stone of modern economic development.

A Bank:-

Accepts deposites of money from public. Pays intrest on money deposited from public. Lends or invest money. Repays the amount on demand. Allows the money deposited to be withdrawn by cheque and

draft.

Banks are permitted to perform other business such as:-

Borrowing or raising of money. Granting and issuing letters of credit, travelers chequesand circuler notes.

Lending money on security or without security or without security.

Providing the transmitting money security

No person or body corporate or otherwise can be a bankerwho does not:-

Take deposit accounts. Take currrnt accounts. Issues and pays cheques. Collect crossed and un crossed cheques for his

customers.

Banking service in India:-

Bouquet of services are at customers demand in today’s banking system. Different types of accounts and loans, facilitating with plastic money transfer across the globe. In India the banking sector is segregated as public or private sector banks, cooperative banks and regional rural banks. Foreign banks has been given a different head followed by upcoming foreign bank in this section.

Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors.

Government of India to Regulate Banking Institutions:-

nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership.The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:

1949 : Enactment of Banking Regulation Act. 1955 : Nationalisation of State Bank of India. 1959 : Nationalisation of SBI subsidiaries. 1969 : Nationalisation of 14 major banks. 1975 : Creation of regional rural banks.

Top Banks in India:-

The following are best banks which are currently operating in India under the guidelines of Reserve Bank of India (RBI)

Abn Amro Bank In IndiaAllahabad Bank In IndiaAmerican Express Bank In IndiaAndhra Bank In IndiaBank Of IndiaCanara BankCentral Bank Of IndiaCITI BankCorporation BankHDFC Bank

HSBC BankICICI BankIDBIIndian Overseas BankOriental Bank Of CommercePunjab National BankState Bank Of India (SBI)Standard Chartered BankUnited Bank Of IndiaAxis bank

Reserve Bank of India

RBI is the central bank of the country since 1934. It regulates, controls credit, issue licenses and functions as banker of all banks and the government. Reserve Bank of India is India’s Central Bank. Reserve Bank perform all the function of a central bank viz. issue of notes, credit control, banker to the state, regulation of banking system in the country etc. it advise the governments on the formulation of monetary policy. The principal function of RBI is to regulate the monetary system of the country in such way that the balanced economic growth of the country is achieved along with economic stability.

Reserve Bank of India(Central bank Supreme monetary authority)

Scheduled Banks

Commercial Banks Corporative Banks

ForeignBanks

RegionalRuralBanks

UrbanCooperativeBanks

StateCooperative

PublicSectorBanks

PrivateSectorBanks

State Bank of India andAssociated banks

OtherNationalizedBanks

Old New

Commercial Banks:- Commercial banks are the oldest banking institutions in the organized sector. They constitute the predominant segment of the banking system in India. commercial bank are those banks which advances loans for short period.

These are the banks which do banking system to earn Profit. Only those Banks are called commercial banks which have been establish in accordance with Indian companies act 1913. state bank of India and its seven subsidiaries are not include in the category of commercial banks because they were established under a separate act.

Co-operative Banks:-

Cooperative banks are a special type of banking in which people cooperate with each other with a view to promoting their mutual interest. Cooperative means working together. In this banking organization people voluntarial cooperative With each other on equal terms to promote their own Economic interst. The year 1904 marked the beginning of the history of agriculturelCooperative banks in India. The function of cooperative banks are similar to the commercial banks. But basic difference is that these banks attach more importance to the agricultural sector and allied service in rural areas.

Foreign Banks:- In India the importance of foreign banks is increasing in the Private sector. Foreign banks is that bank whose head office is located in a foreign country. it is regulated according to the rules of his own country.

It has been stipulated that the minimum capital requirement for foreign banks should be US$ 25 million, spread over 3 branches i.e. US$ 10 million for the first branch additional US$ 10 million for second branch.

Introduction to Regional Rural Banks

Regional Rural Banks (RRBs) from an integral part of the banking system with focus on serving the rural sector. RRBs combine the local feel and familiarity with rural problems, which the cooperatives possess, and the degree of business organization as well as the ability to mobilize deposits which the commercial banks possess. RRBs are specialized rural financial institutions for catering to the requirements of the rural sector.

Regional Rural banks play a significant role in financing the target group in rural sector. Thay are specially designed financial institution working under the guidance of NABARD and the parent commercial banks, spared in rural areas with a close network of branches serving a particular district or region.

An Overview of Indian Regional Rural Banks (RRBs)

In India rural people such as small and marginal farmers, landless agricultural laborers, artisans and socially an economically backward castes and classes they have been exploited in the name of credit facility by informal sector. The rural credit market consists of both formal and informal financial institutions and agencies that meet the credit needs of the rural masses in India. The supply of total formal credit is inadequate and rural credit markets are imperfect and fragmented. Moreover, the distribution of formal sector credit has been unequal, particularly with respect to region and class, cast and gender in the country side.

Regional Rural Banks were established under the provisions of an Ordinance promulgated on the 26th September 1975 and the RRB Act, 1975 with an objective to ensure sufficient institutional credit for agriculture and other rural sectors.

The RRBs mobilize financial resources from rural/semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural laborers and rural artisans.

RRBs are jointly owned by Government of India, the concerned State Government and Sponsor Banks; the issued capital of a RRB is shared by the owners in the proportion of 50%, 15% and 35% respectively.

The first five RRBs were set up in five States in Haryana, West Bengal, Rajasthan, with one each 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 as follows;

Prathama Bank and Gorakhpur kshetriya Gramin Bank in Uttar Pradesh,

Haryana Krishi Gramin Bank in Haryana, Gour Gramin Bank in West Bengal, Jaipur-Nagpur Anchalik Gramin Bank, Rajasthan.

History of Regional Rural banks:-

On the birth anniversary of mahatma Gandhi on October 2, 1975, Regional Rural Banks were established with view to Stepping up rural credit. In 1975, the government of India Appointed a working group under the chairmanship of m. Narasimham, the Deputy Governor of the reserve Bank of India to review the flow of institution credit to the people In Rural areas. The committee was to study the availability Of Institutional credit of the rural peoples.

The committee concluded that the commercial banks would not be able to meet credit requirements of the weaker section of the rural areas in particular and rural community in general. Alternatively the working group suggested that a new type of Banks should be established.

The government accepted the recommendation of the working group and passed an ordinance in September 1977 to establish Regional Rural banks. The main goal of establishing regional rural banks in India was to provide credit to the rural people who are not economically strong enough, especially the small and marginal farmers, artisans, agricultural labours, and even small enterprenrur.

SBI has 30 Regional Rural Banks in India known as RRBs. The rural banks of SBI is spread in 13 states extending from Kashmir to Karnataka and Himachal Pradesh to North East. The total number of SBIs Regional Rural Banks in India branches is 2349 (16%). Till date in rural banking in India, there are 14,475 rural banks in the country of which 2126 (91%) are located in remote rural areas.

The main goal of establishing regional rural banks in India was to provide credit to the rural people who are not economically strong enough, especially the small and marginal farmers, artisans, agricultural labours, and even small entrepreneurs.

Need to establish Regional Rural Banks:-

The main need and objective of the RRBs was to provide credit and other facilities to the small and marginal farmers, agricultural labourers, who had, by and large, not been adequately served by the existing credit institution namely, Cooperative banks and commercial banks:

(1). Co-operative banks:- So far as the cooperative credit structure is concerned it lacks the managerial talent, post credit supervision and the loan recovery. They are also not in position to mobilize necessary resources.

(2). Commercial banks:- These banks are mostly centralized. In urban oriented. Although these can play a crucial role so far as the rural credit is concerned. For this they have to adjust their methods, procedures, training and orientation in accordance with the rural environment. Thus under these circumstances, the commercial banks cannot provide credit to the weaker sections of the rural areas, at a cheap rate.

(3). Need of a new institution:-

Thus in accordance with the rural requirements the necessity was felt to establish such an institution i.e. a rural oriented bank which may fulfill credit needs of the rural people particularly the weaker section. It may be also combine the merits of the above mentioned institutions keeping aside there

drawbacks. The RRBs as subsidiaries to nationalized banks, are expected in the long run not only to provide credit to farmers and village industries butalso mobilize deposits from rural household.

Thus a rural bank has been considered as an institution to combine the rural touch and local feel. It possesses a familiarity with rural problems and modern business organization. In short the institution of rural banks is intended to be “locally based, rural oriented and commercial organized”.

Difference between RRBs and commercial banks :-

Although the RRBs are basically the scheduled commercial banks, yet they differ from each other in the following respects:-

(1). The area of the RRB is limited to a specified region comprising one or more districts of a state.

(2). The RRBs grant direct loans and advances only to small and marginal farmers, rural artisans and agricultural labourers and others of small having small means for productive purpose. (3) The lending rates of RRBs are not higher than the prevailing lending rates of co-operatives societies, in any state.The sponsoring banks and the Reserve bank of India provide many subsidies and concession to RRBs to enable it to function effectively.

Objectives of Regional Rural Banks:-

The original objective of the RRBs was to bring progress with social justice to the rural poor, who were generally denied access to financial services from rural cooperatives as well as commercial banks . The rationale was that during the 60s and 70s, rural cooperatives were dominated by wealthy farmers, and the commercial banks had an urban bias.Therefore, most poor people turned to informal sources for their financing needs. In an effort to provide credit to the poorfrom institutional sources, the RRBs were established in 1975.

It was thought that these banks would combine the rural focus of the cooperatives with the business orientation of the commercial banks, to make credit widely available to rural India’s disadvantaged communities.

Given the initial objective of policy makers to increase outreach,the following two decades saw a large-scale effort to increase the number of banks, bank branches, and disbursements nationwide

Organization of RRBs:- The RRBs have been established by ‘sponser bank’ usually public sector bank. The steering committe on RRBs identifies the districts requiring these banks. Later the central governments sets up RRBs with the consultation of the state government and sponsor banks. Each RRB operates with in local limits with such as name as may be specified by the central governments. The bank can establish its branches at any place within the notified area.

Each RRBs is separate body corporate with perpetual succession and common seal But it closely linked with the sponsor banks . each RRB operates with in local limits with such name as may be specified by the central government.

The head office of RRB will be with in the local limits as specified by the central government. The rural bank may establish its branches or agencies at any place with in the notified area.

Capital:-

RRBs occupy an important position in the rural credit market of India. The rationale for establishment of the RRB was to mobilize deposits, access to central money market and modernized outlook, which the commercial banks have. Sound financial position is essential for any organization to survive to render the services to the society. RRBs have both types of capital i.e., owned and borrowed

The authorized capital of each RRBs is Rs.5 crore which may be increased or reduced by the central government but not below its paid up capital of Rs.25 lakh .

Of which 50 percent is subscribed by the central government, 15 percent by the state govt. and 35 percent by the sponsor bank.

At present the formula for subscription to RRB has been fixed at 60:20:20 between central govt. state govt. and sponsor banks.

The central governments contribution is made through NABARD.

Management:-

Each RRB is managed by a Board of directors.

The general superintendence direction and management ofthe affairs and business of RRB vests with the 9 memberof board of directors.

The central government nominates 3 directors, the state governments has two directors and the sponsor bank nominated 3 directors.

The chairman, usually an officer of the Sponsor bank but is appointed by the central government.

The Board of directors is required to act on business principles and in accordance with the directives and guidelines issued by the Reserve bank. At the state level, state level coordination committees have also been formed to have uniformity of approach of different RRBs.

Strengthening Boards of Management : Further, now that RRBs are being merged and are becoming large size entities,it is necessary that their Boards of Management are strengthened and powers delegated to them on policy and business operations, viz. introduction of new liability and credit products, investment decisions, improving market orientation in raising and deployment of resources, non-fund based business, career progression, transfer policy.

Staff Motivation:-

Since the RRBs were originally envisioned to serve as low-cost rural extensions of the banking system, few investments were made in their infrastructure development. Bank staff were neither provided vehicles nor a vehicle allowance to visit clients. A lack of calculators in some branches adversely affected the productivity, efficiency, and morale of the staff Given the lack of basic infrastructure within bank branches the money-losing business model sponsor banks assigned their junior officers who lacked appropriate loan underwriting or business management skills to head the rural bank branches.

Resources of Funds of Regional Rural Banks

Resources of RRBs:- The main resources of RRBs are:-

(1). Share capital.(2). Deposits from the public.

Deposits from Public

Borrowing from SponsorBanks

Refinance from NABARD

Share Capital

Resources of funds of RRBs

(3). Borrowing from sponsor banks.(4). Refinance from NABARD.

The Reserve Bank of India has put RRB on par with the cooperative banks for refinance facilities i.e. 2% below the bank rate. Like commercial banks, the RRBs, have been made eligible for accommodation against a mere declaration of eligible loans and advances by them. Further the RRB have also been granted the status of scheduled banks by the Reserve Bank. They are allowed to maintain cash reserves @3% of their demand and time liabilities till December, 2002.

The RRBs are allowed to offer 1.5% additional rate of interest on their deposits over the rate offered by commercial banks. The deposits of these banks are also insured by deposits insurance credit guarantee corporation of India ltd., this has been done to protect the interest of the depositors .

Operations:-

The RRBs are required to undertake the following business:

Granting of loans and advances to small and marginal farmers and agriculture laboures, weather individual or in group or to cooperative society including agricultural marketing societies, agriculture processing societies, cooperative farming societies for agriculture purpose or for other related purpose.

Granting of loan and advances to artisans, small entrepreneurs and persons of small means engaged in trade, commerce or industry or other productive activities with in its area of operation.

The RRBs now meet the consumption needs of small and marginal farmers and other borrowers of small means for certain specific purpose such as education, medical expenses etc.

Deposits and Loans Outstanding Of RRBs

RRBs are expected to mobilize resources from rural areas and play a significant role in developing agricultureand rural economy

by deploying mobilized resources in rural sectors for the needy not conversed by other formalcredit institutions.

RRB’ is showing considerable improvement in their credit and deposits performance. The deposits mobilized by the bank has been increased from Rs.44, 539 crore in the year 2001-02 to Rs.1, 20,189 crore in 2008-09. The increase over the period was 2.7 times. Loans outstanding of the RRBs also highlighted the significant improvement as it has been increased from Rs.18,629 crore in the year 2001-02 to Rs.67,802 crore is 2008-09. increase over the period of the study was 3.6 times

The performance of the pre-merger period and post-merger period of the RRBs were compared using to test whether the merger process has resulted in improving the performance of these banks in India during the study period.

Credit Deposit Ratio

The RRBs were conceived to develop rural economy by providing credit and other facilities for the purpose of development of agriculture, trade and other productive activities to the targeted poor people.

The credit deposit ratio of the bank indicates the creation of credit out of the deposits mobilized by the banks. Credit deposits ratio increased from 41.8 in the year 2001-02 to 56.4 in 2008-09.There has been consistent growth in the sphere of credit deposit ratio. The year 2007-08 registered a higher rate i.e. , 59.5%.

The banking sector has been characterised by high liquidity during the last few years, resulting from good deposit mobilisation but restrained lending by managements desperately attempting to improve portfolio quality. Part of this liquidity has been invested in the money markets government securities and bonds, in particular but, with falling real interest rates, the extent to which this is a profitable strategy is now open to question.

RRBs seek interest payment on CRR

Kolkata, July 2 (PTI) Regional Rural Banks have demanded payment of interest on cash reserve ratio, the mandatory deposit which banks have to keep with the Reserve Bank (RBI), to augment financial resources.

General Secretary of All India Regional Rural Bank Employees Association D K Mukherjee said all Regional Rural Banks (RRBs) together have to deposit Rs 8,250 crore with the RBI for maintaining CRR requirements.

But, since no interest payments were made, the RRBs were incurring a loss of more

Credit Disbursed:

At all India level, RRBs account for 18% of loan accounts of all scheduled commercial banks and 3% of loans outstanding. However, in rural areas the share of RRBs in loan accounts is an impressive 38%. More significantly, despite having 38%of all loan accounts, RRBs account for only 21% of total credit outstanding in rural areas, implying there by their better reach to small borrowers.

Growth of Investments:

Investment as a window of deployment of funds was given more emphasis than lending. There has been consistent growth in the sphere of investment activity. It has been observed from the above table that the amount of investment of the bank has been increased from Rs 30,532 crore in the year 2001-02 to Rs65,910 crore in 2008-09. The year 2008-09 registered at a highest percentage.

List of Regional Rural Banks in India:

There are a number of regional rural banks in India. Following are the state-wise list of Indian regional rural banks.

Andhra Pradesh

Andhra Pradesh Grameena Vikas Bank Andhra Pragathi Grameena Bank Deccan Grameena Bank

Arunachal Pradesh

Arunachal Pradesh Rural Bank

Assam

Assam Gramin Vikash Bank Langpi Dehangi Rural Bank

Bihar

Madhya Bihar Gramin Bank Bihar Kshetriya Gramin Bank Uttar Bihar Kshetriya Gramin Bank

Chhattisgarh

Chhattisgarh Gramin Bank Surguja Kshetriya Gramin Bank

Gujarat

Dena Gujarat Gramin Bank Baroda Gujarat Gramin Bank

Haryana

Harayana Gramin Bank Gurgaon Gramin Bank

Himachal Pradesh

Himachal Gramin Bank Parvatiya Gramin Bank

Jharkhand

Jharkhand Gramin Bank Vananchal Gramin Bank

Madhya Pradesh

Narmada Malwa Gramin Bank Satpura Kshetriya Gramin Bank Madhya Bharath Gramin Bank Chambal-Gwalior Kshetriya Gramin Bank

Maharashtra

Marathwada Gramin Bank Aurangabad-Jalna Gramin Bank Wainganga Kshetriya Gramin Bank Vidharbha Kshetriya Gramin Bank

Orissa

Kalinga Gramya Bank Utkal Gramya B

Rajasthan

Baroda Rajasthan Gramin Bank Marwar Ganganagar Bikaner Gramin Bank

Uttar Pradesh

Purvanchal Gramin Bank

Kashi Gomti Samyut Gramin Bank Uttar Pradesh Gramin Bank Baroda Western Uttar Pradesh Gramin Bank

Devipatan Kshetriya Gramin Bank Prathama Bank Baroda Eastern Uttar Pradesh Gramin Bank

West Bengal

Bangiya Gramin Vikash Bank Paschim Banga Gramin Bank Uttar Banga Kshetriya Gramin Bank

Punjab

Punjab Gramin Bank Faridkot-Bhatinda Kshetriya Gramin Bank Malwa Gramin Bank

Karnataka

Karnataka Vikas Grameena Bank Pragathi Gramin Bank Cauvery Kalpatharu Grameena Bank Krishna Grameena Bank Chimagalur-Kodagu Grameena Bank Visveshvaraya Gramin Ban

District Coverage

Regional Rural Banks (RRBs) were established in India essentially for taking banking to the doorsteps of rural masses, particularly in areas without banking facilities. RRB is a bank for rural poor people; its presence in all the states of country especially in underdeveloped states and union territories is strongly realized. RRBs covered 525 out of 605 districts as on 31st March, 2006. After amalgamation, RRBs have become quite large covering most parts of the states in India.

Assam Gramin Vikas Bank, an amalgamated RRB, covers 25 districts, the highest in the country, while five other amalgamated RRBs cover 10 or more districts each. However, 40 RRBs covered two districts and 16 RRBs covered a single district each in 2005-06. Increased coverage of districts by RRBs makes them an important segment of the Rural Financial Institutions (RFI) for financial inclusion.

Branch Network: The number of branches of RRBs increased to 14,494 as on 31 March 2006 from 13,920 branches as on 31 March 1989. The network of the 45 amalgamated RRBs (as on April 2007) was quite large and diverse varying from 85 to 680 branches. The Uttar Bihar KGB, an amalgamated RRB, has 680 branches, followedby Baroda Eastern UPGB with 539 branches. The branch network of stand-alone RRBs varied between 8 and 242 as on 31 March 2006.

Computerisation:

With a view to facilitate the seamless integration of RRBs with the main payment system, there is a need to provide computerisation support to them. Banks will be eligible for support from the Financial Inclusion Funds on a matching contribution of 50% in regard to districts other than tribal districts

and 75% in case of branches located in tribal districts under the Tribal Sub Plan.

Function of Regional Rural Banks

The main functions of RRBs are:

To grant loans and advances to the weaker sections of the rural population especially to the small and marginal farmers, agricultural, labourers, artisans and small entrepreneurs who are engaged in agriculture, trade commerce, industry and other productive activities.

To grant loans and advances to cooperative societies, including marketing societies, agricultural processing societies, cooperatives farming societies, primary agricultural credit societies or farmers service societies for agricultural purposes.

To take the banking services to the doorsteps of the rural masses, particularly in hitherto unbanked rural areas.

To mobilize rural savings by accepting deposits and channelise them for productive activities in the rural areas.

To create a supplementary channel for flow of credit from the urban money market to the rural areas through refinance.

To generate employment opportunities in rural areas.

To bring down the cost of supplying credit in rural areas.

The RRB play a crucial role in our rural economy as they act as alternative agencies to provide institutional credit in rural. In course of time they intend to eliminate moneylenders altogether.

The RRBs provide banking services at the doorsteps of the rural

people, particularly, in those areas which are not served by any commercial banks.

The RRBs mobilize rural savings and channelise in to productive activities. This function of the RRBs motivates rural people, to save out of their earnings and thus encourages saving habits of the people.

The RRBs now also meet the consumption needs of weaker Section specially small and marginal farmers, scheduled castes and scheduled tribes and other borrowers of small means for specific purposes such as education, medical expenses etc.

RRBs avail of the refinance facilities from NABARD in respect of short term and medium term advances granted to them. The major portion of refinance availed of by RRBs from NABARD has been respect of short- term advances.

Research Officer in the Department of Economic Analysis and Policy, Reserve Bank of India and presently working from the Patna office of the Bank. The views expressed here are of the author and not necessarily of the institution to which he belongs.

regional rural banks (RRBs) have taken deep roots and have become a sort of inseparable part of the rural credit structure in India. The financial viability of the RRBs has, however, been a matter of concern since the 1980s, just five years after their existence. A number of committees have gone into the issue of their financial viability and possible restructuring. This study follows a deductive approach.

Reserve Bank of India has brought RRB’s under the ambit of priority sector lending on par with the commercial banks. They have to ensure that forty percent of their advances are accounted for the priority sector. Within the 40% priority target, 25% should go to weaker section or 10% of their total advances to go to weaker section.

Amalgamation of RRBs:-

The advisory committee on flow of credit to agriculture and related activities in june 2004 recommended restructuring of RRBs in order to improve the operational viability of RRBs and take advantages of the economics of scale.

An internal working group on RRBs was set up by the Reserve Bank to examine various alternatives available within the existing legal framework for strengthening the RRBs.

In order to reposition RRBs as an effective instrument of credit delivery in the Indian financial system, the governments of India after consultation with NABARD, the concerned state governments and sponsor banks initiated state level sponsor bank-wise amalgamation of RRBs in September 2005 to over come the deficiencies prevailing in RRBs.

The amalgamation of 147 RRBs into 46 new RRBs, sponsored by 19 banks in 17 states, effected by the government of India since September 12, 2005, the total number of RRBs declined from 196 to 91 as on march 2008.

With further amalgamation, and formation of a new RRB in the union Territory of Pandicherry, the total number of RRBs, all over India, declined to 88 as on august 31, 2008.

Total districts covered by the 45 amalgamated RRBs were 586 as on march 31, 2008. each of the RRBs covered districts ranging from 2 to 25. The number of branches of amalgamated RRBs as on march 31, 2008 was 14,790. the branch network of these amalgamated RRBs was quite large, varying from 50 to 677 branches.

It was announced in the union budget 2007-08 that, among other things, the RRBs, which have a negative net worth, would be recapitalized in a phased manner.

Allocation of Work in RRB

Policy and operational matters:

Legislative matters with regard to RRB Act, 1976 and framing of rules there under

Nomination of non-official directors on the Board of RRB Appointment of Chairman of RRBs by the sponsor bank in consultation

with NABARD Preparation of Budget Estimates for providing sanction of share capital

and additional share capital Review of performance of RRBs Bank security and vigilance Laying of Annual Reports of all RRBs along with review thereof Parliament Questions, Assurances, Parliament Committees, etc.

Service Matters:

Wage revision for RRB employees Manpower planning for RRBs Formation of Staff Service Regulation for RRBs Recruitment Promotion Rules for employees and officers of RRBs

Others:

Handling of VIP/PMO and Special Watch cases Matters relating to Unions & Associations of RRBs and other related

matters.

Performances of RRBs:-

The role and financial performance of RRBs have been evolving in response to policy initiatives as well the changing business environment. The total liabilities and of RRBs as on 31, 2008, was Rs. 1,23541 crore, deposits were 99,095 crore and borrowing were 11,649 crore.

The consolidated balance sheet of RRBs expanded by 16.8% during 2007-08 as compared with 18% in 2006-07.

On the asset side, net advances of RRBs increased by 22.9% during the period. Among the major items on the liabilities side, borrowing increased by 19.2% and total deposits by 19.2%

The number of both profit-making and loss- making RRBs declined to 82 and 8, respectively at end march 2009, from 81 and 15 respectively at end march 2008.

During 2008-09, 90 RRBs extended new loans to the extent of Rs. 38,464 crore as against Rs. 33,043 crore during 2007-08. of this, the share of the priority sector was 82.1%. As at end march 2008, the outstanding advances of RRBs were Rs. 59,751 crore and the share of priority sector was about 83.1%.

The share of agriculture loans in 2008-09, declined marginally to 55.4% at end march 2008 from 56.6% at end march 2008

Institution credit to agriculture and allied activities by RRBs in 2008-09 was Rs. 33,112 crore.

The productivity of RRBs, in terms of per branch and per employee, increased significantly during 2007-08.They are also implementing differential role of interest schemes for the weaker sections, physically handicapped persons

Performance of RRBs as on March 31, 2009

Total number of RRBs - 91

Number of Branches - Rs. 14,790

Deposits - Rs. 99,095

loans outstanding - Rs. 59,751 crore

Number of loss Making Banks - 8

No. of loss Making Banks - 82

Operating Profits - Rs. 2154 crore

Net profits - Rs. 1,374 crore

Districts covered. - 586

No. of RRBs in profit - 111

Investments - 41182

No. of districts covered - 525

Credit-deposit (CD) ratio - 56%

Per branch productivity - 7.66

Per staff productivity - 1.62

No. of staff - 68629

RRBs established with the explicit objective of

Bridging the credit gap in rural areas Check the outflow of rural deposits to urban area

Reduce regional imbalances and increase rural employment generation

The main objectives of setting up the RRB is to provide credit and other facilities‚ especially to the small and marginal farmers‚ agricultural labourers artisans and small entrepreneurs in rural areas.

Concession to RRBs:-

From the beginning, the sponsor banks have continued to provide managerial and financial assistance to RRBs and also other concession such as lower rate of interest (8.5%) on the latter’s borrowings from sponsor banks. Further, the cost of staff deputed to RRBs and training expenses of RRB staff are borne by the sponsor banks.

The reserve bank India has been granting many concession to RRBs:

(a) RRBs are allowed to maintain cash reserve ratio at 3 percent and statutory liquidity ratio at 25 percent.

(b) RRBs are provided refinance facilities through NABARD.

Restructuring of RRBs:-

To solve the problems of losses of RRBs and improve their viability efforts have been made in recent years to restricting their operation and infuse fresh capital to them. The Reserve Bank of India appointed the M.C. Bhandari committee to suggest measures or restricting RRBs. As recommended by the bhandari committee, 49 RRBs were taken for restricting and revival in 1994-95. The government of India released a sum of Rs. 1867.99 crore between 1994-98 and 1998-99 for the recapitalization of RRBs.

Business strategy: portfolio investments and reduced dependence on agriculture

The sample RRBs have adopted multiple strategies for the achievement of the profitability viability objective. In addition to the measures made possible or necessitated by the policy changes – branch relocation, non-priority sector lending and greater emphasis on appraisal systems – RRBs have, particularly since the latter half of the 1990s, placed a high proportion of their assets in investments.

Essentially, these banks were able to take advantage of the high real interest rate regime prevailing at the time to obtain relatively high yields from financial instruments such as government bonds, inter-bank lending and the call money market with only a fraction of the real level of risk associatedwith their loan portfolios.

Overall, the investments of all 196 RRBs as at end-March 2002 constitute 44.5% of total assets. Thus, it is apparent from the figure that the sample is representative of the industry as a whole. RRB 4, which has a very low C-D ratio, expectedly has the highest exposure to investments. However, it is also the least profitable of the sample RRBs and it would appear that neither its lending nor its investment strategies have been particularly successful.

In addition to shifting away from priority sector lending, RRBs have adjusted their portfolios within the priority sector. There is now a much lower dependence on agriculture and allied activities than in the past. While to begin with RRBs lent almost exclusively for agriculture and allied activities the current industry average is around 46% of the loan portfolio.

Achievements of Regional Rural Banks

The RRBs have carried banking to the doorsteps of rural masses. They have opened branches in remote and isolated villages which had no banking facilities.

They starting with five RRBs at Moradabad and gorakhpur in uttar Pradesh, jaipur in Rajasthan, Bhivani in Haryana and malda in west Bengal.

The RRBs have achieved a phenomenal growth over the year. As on march 1995, they numbered 196, covering 417 districts, with a network of 14,536 branches.

The aggregate outstanding deposits of 196 RRBs as on March 1995 were Rs 10,958 crores. Their aggregate direct and indirect outstanding advances stood at Rs 6226 crores.

The credit - deposit ratio declined from 59 percent on 31 march 1995. overdues as a percentages to advances outstanding declined from 34.9% to 29.7% during this period.

Borrowing of RRBs from sponsor banks, NABARD, IDBI, SIDBI, and other financial institution aggregated Rs. 2,312 crores as at the end of march 1995. of this 79.5% was from NABARD. The borrowings constituted 37.1% during this period.

During 2000- 01, the NABARD sanctioned Rs 570 crores as short- term credit limits for seasonal and non-seasonal agricultural operations to 122 RRBs. Other short-term credit limits aggregating Rs 147 crores were sanctioned to 47 RRBs and non-schematic medium- term credit limits aggregating Rs 80 crores were sanctioned to 79 RRBs during 2000-01.

The NABARD also sanctioned Rs 3,468 crores for 6,149 schemes to RRBs upto March 2001. The amount of refinancing availed of by RRBs from there respective sponsor banks, IDBI, SIDBI, and other institutions stood at 396.25 crores as at end of march 1995.

Major achievements in agriculture field

Farmers Welfare and Agriculture Development Department is making all out efforts for conveying the benefits of the state government's welfare schemes to farmers with a view to making agriculture a profitable business. As a result of these efforts, Madhya Pradesh now stands on top as far as production of pulses, oilseeds, gram, maize and soyabean is concerned. State's share in soyabean production is 57.42 per cent. This is the result of Agriculture Fortnights organised before Rabi as well as Kharif sowing to make farmers aware of latest techniques of farming and sowing and method of choosing the crop.

Similarly, the department has introduced novel schemes including Kisan Rath and Agriculture Fair in the field of agriculture extension. National Productivity Council, New Delhi has awarded the state for excellent performance in agriculture extension. With a view to benefiting farmers more, Patwari Halqa was made the implementation unit of National Crop Insurance Scheme in place of Tahasil for paddy irrigated, paddy non-irrigated, soyabean and Tuar pulses for Kharif-2006 and wheat irrigated, wheat non-irrigated, gram and mustard for Rabi-2007.

National Foodgrains Security Mission was launched by National Development Council on May 29, 2007 under which Central Regional Scheme has been

implemented in Madhya Pradesh during the year 2007-08. With a view to facilitating agricultural works in the rural background and saving bovine species, a scheme to grant subsidy on the purchase of bullock-carts from the year 2007-08. Under the guidance of the Union government, National Agriculture Insurance Scheme has been implemented by Madhya Pradesh government to give financial assistance to farmers in case their crops are devastated by natural calamities.

Under this scheme, there is provision of giving insurance money to affected farmers through co-operative banks, Regional Rural Banks as well as commercial banks. The unit of this scheme was tehasil which has been shifted to Patwari Halqa since Kharif 2006 and it gave insurance cover to paddy irrigated, paddy non-irrigated, soya bean and Tuar. From Kharif-2007, maize and millet were included in the crop insurance cover.

Facilities provide by RRBs in Rural areas

RRBs has been considered as an institution to combine the rural touch and local feel. It possess a familiarity with rural problems. Regional Rural banks provide various facilities in the Rural areas.

Kisan credit card scheme :

Kisan credit card scheme was introduced in 1998-99 to providing credit to the farmers by the regional rural banks and commercial banks. Kisan credit cards are issued to those farmers who are eligible for production credit of Rs. 5000 and more . eligible farmers are provide with a kisan credit card a pass book. The card holders can seek immediate loans for productive purposes with out making any formula making application. the bank have issued 272

lakh credit cards and the amount sanctioned Rs. 64,065 crore.

Local area banks :

The local area banks were set up in the private sector by regional rural banks in 1996 to promote rural savings and to provide credit for variable economic activities in rural areas. These banks are essentially expected to enhance the institutional credit framework in the rural and semi urban areas. As on june 30, 1999 eight local area banks have been set up.

Agricultural and rural debt relief scheme 1990:

According to this scheme loans worth Rs. 10,000 taken from the government banks or RRBs for agricultural purposes have been written off. State government have also formulated similar relief schemes. Loans worth Rs. 7829 crore have been written off under the debt relief scheme.

New strategy for rural lending service area approach:

On April 1 1989 new strategy for rural lending service area approach was launched as an integrated plan of land banks. Under this program rural and semi-urban branches of the regional rural banks and commercial banks have been entrusted with the task of designing strategies catering to the credit needs of specific areas.

Financial schemes for agriculturalists

Regional Rural banks were presents a wide range of financial schemes for agriculturalists. These schemes include crop loans, Produce Marketing Loan Scheme, Loan Against Warehouse Receipts, Kisan Credit Card Scheme, agricultural term loans, Land Development Scheme, Minor Irrigation Scheme, Farm Mechanisation Scheme, Financing Of Combine Harvesters, Kisan Gold Card Scheme, Land Purchase Scheme, Krishi Plus Scheme, Arties Plus Scheme, Dairy Plus Scheme, Broiler Plus Scheme, Finance To Horticulture, Lead Bank Scheme and Agri Business Heads Scheme.

Kisan Gold Card Scheme:

Kisan gold card scheme provided by RRBs to the farmers to provide single window hassle- free financial support to farmers for farm and non farm activities. Under this RRBs provide credit to the farmers upto 10 lacs based on value of land. This facility is available for both farm and non farm activities. The credit is provide for a period of 5 years.

Land purchase scheme

Regional rural Banks and cooperative banks are coming out with attractive loan plans for its customers for purchase of land, purchase or construction of house/flat. The loan can be taken for both land purchase as well as construction on the land. The quantum of loan sanctioned, depends on a number of factors like the cost of house/flat, person's age while applying for loan, income, repayment capacity etc. Loans of higher amount may be considered on the basis of merit of the case.

Minor irrigation scheme

The minor irrigation schemes provide the farmers with controlled and timely irrigation which the new high yielding varieties of seeds demand. These schemes are labor intensive, quick maturing and do not require heavy investments for their installation. The criteria for classification of minor irrigation schemes have been changing from time to time. Since April 1993 all ground water schemes and surface water schemes (both flow and lift) having culturable command area upto 2000 hectares individually are considered as minor irrigation schemes.

The success of Agri (Kisan) Credit Card

RRBs, like other banks in the country, have responded enthusiastically to the Kisan Credit Card, a line-ofcredit facility designed and introduced by NABARD. This product has now become the main driver of the lending operations of a number of RRBs.

The KCC does away with many constraints of the traditional agricultural loans offered by banks. Since it provides a three-year credit limit to the borrower, tedious loan appraisals every season are not necessary. The credit limit is decided on the basis of the borrower’s landholding, type of land, main crops in the area, expected yields and revenue. As in any line-of-credit facility, the borrower can repay according to convenience and can draw any amount within the specified credit limit.

The interest charged on the KCC is variable, with smaller clients being offered preferential interest rates. Borrowers can use the loans for any activity of agricultural production and direct bank payments to fertilizer or equipment providers are not needed. All these aspects result in bringing down delivery costs and help the RRBs to earn spreads up to 3–4% on the product.

RRBs as Self Help Promotion Institutions (SHPI)

RRBs have not only provided financial services to the SHG-Bank LinkageProgramme, but have also played a significant role as SHPIs. As many as 104 RRBs (31 March 2006) are also functioning as SHPIs with grant assistance from

NABARD. Non-availability of good NGOs is a matter of concern especially in North-Eastern, Central and Eastern Regions. RRBs can play a vital role as SHPIs in such areas. They provide self Help Group(SHG) loans

One to three year loans (or cash credit facilities) with regular repayment streams. Usually under Rs50,000 ($1,050) per group – though a recently-introduced government-sponsored scheme (SGSY)21 has higher loan sizes and a subsidy component.for this loan A Groups (SHGs) of men/women with up to 20 members, selected from families with incomes less than the government delineated poverty line for SGSY. For others, the banks are free to select and support groups promoted by NGOs or the banks themselves

Regional rural Banks prepare Random for core banking

The Regional Rural Banks (RRBs) in Orissa, in association with the nationalized banks sponsoring them, have prepared the road map for implementation of 100 per cent Core Banking Solutions (CBS) before the stipulated time period fixed by the Reserve Bank of India (RBI). RBI has directed all the RRBs across the country to be fully CBS compliant by September 2011

All the five RRBs in the state have started work on their IT-systems on a war-footing to implement the CBS in line with the RBI guidelines. The nationalized banks sponsoring these RRBs have extended their help and taken active interest in guiding them on IT up gradation.

The cost-sharing of the project is yet to be decided between the RRBs and the nationalized banks even though several nationalized banks are willing to bear the entire cost of the project, said C Doraswamy, chairman, Rushikulya Gramya Bank (RGB). “Andhra Bank has appointed a nodal officer to oversee the implementation of 100 per cent CBS in Rushikulya Gramya Bank RGB has 80 branches and plans to add 5 more branches during the current fiscal.Sponsor Banks of RRBs:

Sponsor banks: The role of the sponsor bank as a guiding factor for RRBs particularly in there form period has been paramount. The study included RRBs sponsored by two large progressive

commercial banks that have sponsored a number of RRBs. This was done in order to assess the impact of the institutional environment on RRB operations.

The sponsor banks invariably the large public sector banks were entrusted with the role of guiding the RRBs in banking operations, a role that continues even 25 years after the establishment of the first RRBs. For this reason, the sponsor banks still also depute a General Manager to each of the RRBs to manage day-to-day operations and supplement the banking skills of their nominated Chairmen.

The ownership structure of RRBs has remained unchanged since their inception. Three categories of owners of the RRBs central and state governments and the sponsor banks hold the equity of RRBs in the ratio 50:15:35 respectively. the State Bank of India (SBI) and its subsidiaries account for the largest share of business volumes and network the other sponsor bank of the sample RRBs for this study, Syndicate Bank performs exceptionally well in financial performance and coverage in relation to its market share

Some sponsor banks of RRBs: Bank of Baroda

State bank of India

Central bank

Bank of India

Canara Bank

Vijya Bank

Syndicate Bank

Punjab National Bank

Dena Bank

Duties of the Sponsor Bank have been spelled out in Section 3 (3) of RRB act as:

Subscribing to the share capital of RRB,

Training the personnel of RRB,

Providing such managerial and financial assistance during the first five years as mutually agreed upon.

Under Section 11 of Act, the Sponsor Bank shall appoint the Chairman

of a RRB and specify the period of appointment. The appointment, however, would not exceed a period of five years.

The Sponsor Bank has the right to remove the Chairman at any time (Section 11(4)).

The Sponsor Bank shall depute officers or other employees to RRB as may be necessary or desirable (Section 17 of RRB Act, 1976).

Amalgamation of RRBs under Section 23-A can be done by Central Government in consultation with NABARD, State Government and the Sponsor Bank.

Governments of India and Reserve Bank of India have further issued the directives that, ‘for overall management of the RRB it would be the responsibility of the Sponsor Bank to guide the RRB in various matters on human resource management, business development, branch expansion.

The sponsor banks – invariably the large public sector banks – were entrusted with the role of guiding the RRBs in banking operations, a role that continues even 25 years after the establishment of the first RRBs. For this reason, the sponsor banks still also depute a General Manager to each of the RRBs to manage day-to-day operations and supplement the banking skills of their nominated Chairmen.

Role of Regional Rural Banks in Economic Development

The importance of the rural banking in the economic development of a country cannot be overlooked. As Gandhi ji said “Real India lies in villages,” and village economy is the backbone of Indian economy. Without the upliftment of the rural economy as well as the rural people of our country, the objectives of economic planning cannot be achieved.

In fact, the real growth of Indian economy lied in the emancipation of rural masses from acute poverty, unemployment, and socio-economic backwardness. Keeping this end in view, various important plans and programmes of rural development have been conceived and implemented by the government of India since the commencement of first five-year plan from 1951-56.

But an appraisal of the achievement of these programs clearly reveals that much programmes failed to achieve the desired objectives due to the backward economic condition and lack of adequate finance to the poor people in the rural areas. Hence, bank and other financial institutions are of vital importance for development of rural economy of a country.

The present study is a modest attempt to make an appraisal of the credit needs of the rural people and the way Regional Rural Bank, i.e., Arunachal Pradesh Rural Bank, has been extending its service to meet the same in the state of Arunachal Pradesh. It deals with the performance evaluation of Arunachal Pradesh.

Rural Bank (APRB) for the economic development of the state. Further, an attempt has also been made to study the growth and performance of Scheduled Commercial Banks with special emphasis on Regional Rural Banks (RRBs) in Indian and North-East Region.

National Bank for Agriculture and Rural Development

NABARD

The national Bank for Agriculture and Rural Development (NABARD) was established on 12 July 1982 by the government of India by merging the Agricultural credit Department of the RBI. This bank was nick- name as NABARD. It was established as an apex Bank for Agricultural credit. It was expected to play an important role in agricultural credit.

Obective of NABARD:-

The NABARD is an apex development bank which provides help for agricultural areas, the NABARD provides refinance to commercial banks and Regional Rural Banks for loan extended by them under the scheme. A wide spectrum of activities, industries covering agriculture, industries, services and business that are bankable and viable are eligible for refinance.

Role of NABARD in RRBs:

The NABARD provides refinance facilities to Regional Rural Banks, State cooperative Banks. The total amount disbursed in 2002 amounted to Rs. 18,075 crore.

It inspects the working of RRBs and cooperative banks of all types except the primary cooperative banks.

The NABARD should play a more active role in advising and helping their RRBs in managing their funds, in appraising loan scheme, in making proper end-use of credit.

The NABARD should charge a lower interest rate on the refinance to RRBs and involve themselves less in RRBs short term and non-schematic loans.

Restructuring of RRBs:

To solve the problem of losses of RRBs and improve their viability, efforts have been made in recent years to restructure their operations and infuse fresh capital into them. The Reserve Bank of India appointed the M.C. Bhandari committee to suggest measures for restructuring RRBs. As recommended by the committee, 49 RRBs were taken for restructuring and revival in 1994-95.

The Basu committee set up by NABARD recommended in December 1995 the selection of 68 RRBs for comprehensive restructuring under phase II. The initiatives were primarily in the area of interest rate, location of branch, credit allocation, direction of credit and manpower policy in simultaneity with with the infusion of capital. The governments of India released a sum of Rs. 1,867.65 crore between 1994-98 and 1998-99 for the recapitalization of RRBs.

In, addition, additional equity support of Rs. 305.3 crore was provide in 1998-99. In 1998-99, 175 of the total of 196 RRBs stood fully or partially recapitalizes while 2 RRBs did not require support. Only 19 RRBs has been raised from Rs. 75 lakh to Rs. 1 crore

NABARD monitor the working of RRBs as regards productivity, cash management, advances portfolio and recovery performance. NABARD has devised a package of short-term measures for RRBs.

They are freed from their service area obligations. They are permitted to increase their non- target group financing from

40% to 60%. Freedom given to them to open extension counters. They are allowed

to relocate some of their loss-making branches at Agricultural produce centers, market yards, mandis.

Permission has also been granted to them to upgrade and deepen the Range of their activities to cover non-fund activities.

It is hoped that with their restructuring the RRBs will be able to function more smoothly. Problems of Regional Rural Banks

The RRBs have done a commendable job in mobilizing the saving of the small farmers, artisans and agricultural labourers. The presence of the banks has helped to develop banking habits among rural masses. Inspite of the progress made, the RRBs have been facing the following probiems:

a. Shortage of resources : These banks do not have adequate resources for fulfilling the requirements of all the eligible rural people. Their capital base is very weak. The state governments have not fully contributed their share. Consequently, they have suffered continuous losses and their capital base stands eroded.

b. Difficulty in deposits mobilization: Since these banks provide credit facilities only to the weaker sections of the society, they find it difficult to attract deposits from the middle classes and the rural well-to-do people. The rural well-to-do people prefer to deposit their savings in commercial banks from whom they get credit facilities.

c. Faculty credit policy: These banks have concentrated on giving only crop loans and for the schemes sponsored by the state governments. Activities like cottage and rural industries have not been given due importance. Similarly, rural artisans and other self- employed persons have not received much help from these banks.

d. High loans Transaction costs: Since the pay scales in the regional rural banks are the same as in the commercial banks, their cost of loans transactions is very high and sometimes even higher than the rural branches of the commercial banks.

e. Faulty coverage : Their coverage varies from state to state. In some states backward areas have not been covered. In many districts these banks do not have link branches at the Taluka headquarters for meeting the cash requirements. In some of the places suitable accommodation is not available for housing the branches.

f. Problems concerning Managements: As all the RRBs institutions have been set up at the district level, the sponsor banks have deputed only the middle- management staff to look after them. These deputed staff member are not in a position to take independent decision in this new environment. Further, the meeting of the board of directors of RRBs are not held regularly. Then there are other numerous problems that arise due to multi- agency controls of these banks and their functioning is also not uniform in the all states.

History

Bank of Baroda had sponsored 19 RRBs in the country of which 7 RRBs were in eastern Uttar Pradesh. During the period from 1976 to 2006 banking industry had undergone various changes and RRBs were no exception. Considering the need for structural changes in RRBs in view of dynamically changing economic scenario, Govt. of India vide its notification dt. 23.02.2006 amalgamated 7 RRBs of Eastern Uttar Pradesh namely Allahabad Kshetriya Gramin Bank, Sultanpur Kshetriya Gramin Bank, Faizabad  Kshetriya Gramin Bank, Pratapgarh Kshetriya Gramin Bank, Kanpur Kshetriya Gramin Bank, Raebareli Kshetriya Gramin Bank, Fatehpur Kshetriya Gramin Bank, and 2 RRBs of Western Uttar Pradesh namely Bareilly Kshetriya Gramin Bank, Shahjahanpurr Kshetriya Gramin Bank sponsored by Bank of Baroda.

Thus emerged two new corporates called Baroda Eastern Uttar Pradesh Gramin Bank and Baroda Western Uttar Pradesh Gramin Bank with their Head Offices in Raebareli and Bareilly respectively. After a shortwhile from this restructuring, govt. of India vide notification dt. 31st March 2008, let the two banks amalgamate to form a new entity called Baroda Uttar Pradesh Gramin Bank with its Head Office in Raebareli.

t has been a long and eventful journey of almost a century across 26 countries. Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai, is a saga of vision, enterprise, financial prudence and corporate governance.

. Our Mission

Mission is to transform into a Bank with sound financials committed to overall economic development of rural areas with care, competence and compassion towards its customers. To be a top ranking National Bank of International Standards committed to augmenting stake holders' value through concern, care and com

Our VisionTo stage a turn around in profitability and NPA reduction, to double the flow of credit to agriculture, to achieve a quantum jump in savings bank deposit mobilization, to ensure saturation of villages in our service area, to prepare a committed and knowledgeable workforce with a view to transforming the Bank into the most preferred banking outlet in rural areas.

Our Logo Our new logo is a unique representation of a composite symbol. It comprises dual 'B' letterforms that hold the rays of the rising sun. We call this the Baroda Sun and it represents the Sponsor Bank – Bank of Baroda. The twin green leaf twigs encircling the Baroda Sun and the pair of ploughs forming its base represent our rural orientation and our commitment towards rural development.

Baroda Gramin Bank - Product & Services

Product & Service SSI Finance Credit Schemes Deposit Schemes Kisan credit card Schemes

Kisan Gold card Schemes

Swarojgar Credit Card

Baroda Uttar Pradesh Gramin Bank has several credit schemes under various sectors for the customers from all walks of life with special schemes for the rural people. Swarojgar Credit Card Scheme (SCC Scheme) was introduced in September 2003 consequent upon the announcement made by Hon'ble Prime Minister in his Independent Day Speech on 15 August 2003 and the scheme was adopted by the bank right since inception.

Women Self Help Group

The bank has been a premier institution in banking with the rural poor, down trodden, neglected sector of the society ever since the inception of the RRBs Baroda Uttar Pradesh Gramin Bank in the social banking having an outreach of banking facilities to over 45 lack rural people residing in the every nook & corner of the 13 districts of

CEO of Baroda Uttar Pradesh Gramin Bank M. P. Singh

Location of our Bank:

Area of operations

Baroda Uttar Pradesh Gramin Bank

Head office A-1, Civil Lines, RaeBareli, Uttar Pradesh

Presence of Baroda Uttar Pradesh Gramin Bank: Allahabad, Ambedkar Nagar, Faizabad, Fatehpur, Kanpur Dehat, Kanpur Nagar, Kaushambi, Pratapgarh, Raibareli and

Sultanpur

Sponsor Bank of Baroda uttar pardesh Gramin Bank:

On 20th July 1908, Bank of Baroda was established under the rules of Companies Act 1897, in a small building at Baroda, by the Maharaja with a paid up capital of Rs.10 lakhs. The guidelines set by the Maharaja for the bank was to serve the people of the State of Baroda as well as the neighboring regions with money lending, saving, transmission and encouraging the development of arts, science, commerce and trade for the people.

Total assets over 1,78,000 crores; number of offices and branches 2800; more than 1000 ATMs, notwithstanding affiliates, subsidiaries and delivery channels all over the world.

Performance of Regional Rural Banks (RRBs) sponsored by the BankThe Bank has sponsored five RRBs as under. Baroda Uttar Pradesh Gramin Bank, Head Office : Raebareli.· Baroda Rajasthan Gramin Bank, Head Office : Ajmer.· Baroda Gujarat Gramin Bank, Head Office : Bharuch.· Nainital-Almora Kshetriya Gramin Bank, Head Office: Haldwani.· Jhabua-Dhar Kshetriya Gramin Bank, Head Office : Jhabua.

The aggregate business of these five RRBs rose to Rs 16,244.41 crore as of March, 2010 from Rs 14,278.28crore as at end-March, 2009, registering a growth of 13.77%.

Bank of Baroda financials 2010

Sales Rs. 17,754 crores Profits Rs. 3,058.33 crores Assets Rs. 2,78,316.70 crores

International presence

Bank of Baroda Building in Dubai

In its international expansion, the Bank of Baroda followed the Indian diaspora, especially that of the Gujaratis. It has significant international presence with a network of 72 offices in 25 countries, six subsidiaries, and four representative offices. [3]

Among the Bank of Baroda’s 42 overseas branches are ones in the world’s major financial centers (e.g., New York, London, Dubai, Hong Kong (which it has upgraded recently), Brussels and Singapore), as well as a number in other countries. The bank is engaged in retail banking via 17 branches of subsidiaries in Botswana, Guyana, Kenya, Tanzania, and Uganda. The Bank of Baroda also has a joint-venture bank in Zambia with nine branches. The Bank of Baroda maintains representative offices in Malaysia, China, Thailand, and Australia. It plans to upgrade its offices in China and Malaysia shortly to a branch and joint-venture, respectively.

The Bank of Baroda has received permission or in principle approval from host country regulators to open new offices in Trinidad and Tobago and Ghana, where it seeks to establish joint ventures or subsidiaries. The bank has received Reserve Bank of India approval to open offices in The Maldives, and New Zealand. It is seeking approval for operations in Bahrain, South Africa, Kuwait, Mozambique, and Qatar and is establishing offices in Canada, New Zealand, Sri Lanka, Bahrain, Saudi Arabia, and Russia. It also has plans to extend its existing operations in the United Kingdom, the United Arab Emirates, and Botswana. The slogan of bank of baroda is "india's International Bank"

Need of the study:-

The need of study arises for know that Regional Rural Banks really provide financial help to low-income clients.

To know the performance of regional rural banks in rural areas.

To know that regional rural banks were successed or failed in fulfilling the credit needs of rural people.

To know that Regional Rural banks really help in development of rural areas.

Objectives:-

To analysis performance and achievement of Regional Rural Banks in backward areas.

To know people’s behaviors regarding Regional rural banks. They were satisfied with there work

To analysis how to work regional rural banks in rural areas.

To know about financial structure of RRBs.

To know about sources of finance of RRBs.

To know about facilities provided by RRBs to low income clients.

To analysis profits, investment, cash Reserve Ratio losses of RRBs as compare to previoues year.

Scope of the Study:-

To provide information about Regional Rural Banks to the people that how RRBs provide financial help to the poor people.

To provide information about special facilities provided by RRBs to farmers, small scale industries and others in rural areas.

To make people aware about Regional Rural Banks in India.

To provide information about financial schemes of RRBs which is started by RRBs for the benefits of the rural people’s.

Research:- Research refers to search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. It is an art of scientific investigation.

Research Methodology:-

It is the way to systematically solve a problem. The methodology adopted in this study is explained below:-

Research Design :-

A. Problem defining:- In studying about Regional Rural Banks in india and can India’s Regional Rural Banks really serve low-income clients, it is necessary to know about how to operate Regional Rural Banks in rural areas, its performance and services provide by them. In this study my focus is upon performance and services of Regional Rural banks. This is my problem to be studies for research.

B. Literature Survey:-I have used newspapers, magazines related to business & finance & from websites.

C. Type of research: - The research is qualitative & descriptive in nature. Qualitative research is that talk about the quality of the subject to be researched and Descriptive research is one that describes things as exists in present.

D. Data collection Design:-

I. Sources of data

1 ) Primary Sources - I have used questionnaire as primary source for collecting data for my study.

2) Secondary sources - I have collected my secondary data from websites & journals.

II. Sampling

It represents whole population. It is the processes of choosing a sample from whole population. I have choose a sample of Low-income people, Farmers, artiest who are used the services of Regional Rural Banks as a sample.

III. Tools

I have used some charts (Pie chart, column chart, cylinder chart, cone chart) and hypothesis tests.

IV. Sampling Size

It represents that how many candidates you’ve have chosen to be filled up your questionnaire or candidates upon whom you can study. I had chosen sample of 100 candidates.

V. Sampling Techniques

Deliberate & Convenience Sampling.

VI. Data InterpretationData interpretation is that in which we analysis the whole

collected data & tries to give it in simple words to be understandable.

1) Do you know about Regional Rural Banks ?

YES 60%

NO 40%

60

40

0

10

20

30

40

50

60

70

YES NO

Interpretation :- Out of total population of a particular area only 60% peoples are aware with the function of Regional rural Banks and 40% peoples are not aware about RRBs.

2) which types of banks you preferred in Rural areas?

Banks %

Private banks 30Public banks 60others 10

30%

60%

10%

private banks

public banks

others banks

Interpretation: I have chosen Particular rural area for this study. In this area 30% People are preferred Private banks for fulfilling of there credit needs and 60% people are preferred Public banks. Only 10% people are preferred others banks

3) What is the main source of your income ?

Sources percentage

agriculture 60artisans 20Self employment 10others 10

60

20

10 10

0

10

20

30

40

50

60

agriclture

artisans

self employment

other

Interpretation: In a particular chosen area 60% peoples are depending on agriculture, 20% people are artiest and depending on it for there income. 10% people are depending on self employment for there income, and 10% people are depends other activities for there income.

4) what is your income ? (yearly based)

1lakh 602-4 lakh 20

4-5 lakh 10More than 5 10

60

20

10 10

0

10

20

30

40

50

60

1 lakh

2-4 lakh

4-5 lakh

more than

Interpretation: In a particular area out of 100 peoples 60 peoples have income up to 1 lakh, 20 peoples have income between 2-4 lakh, 10 peoples have income between 4-5 lakh and only 10 peoples are there who have more than 5 lakh

5) Is RRBs really serve low income clients?

YES 60

NO 30

NO Idea 10

60

30

10

0

10

20

30

40

50

60

YES

NO

NO IDEA

Interpretation : Out of total number of people 60 percent people believe that RRBs really serve low income clients. 30 percent people are not believing that RRBs fulfill the credit requirements of a low income clients and 10 percent people have no idea about that.

6) What is the credit deposit ratio of the RRBs in the last 5 years?

Year Ratio

2001 - 02 41.8%2007 - 08 59.5%2008 - 09 60.2%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Series1 41.80% 59.50% 60.20%

2001-02 2007-08 2008-09

Interpretation: The credit deposit ratio of RRBs increases continuously. In year 2001-02 it was 41.8% and in the year 2007-08 it was 59.5% and also increases in the year 2008-09 with 60.2%.

7) What is the investment and deposit of RRBs in last few years? (in crore)

Year Investment

2003-04 41,1822007-08 48,5602009-10 65,910

41,182

48,560

65,910

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2003-04

2007-08

2009-10

Interpretation: Investment and deposit of RRBs increases continuously. In year 2003-04 it is 41,182 it was increases in 2007-08 with 48,560 and in year 2009-10 it is 65,910

8) Branches of RRBs from rural to semi- urban & urban areas.

12448

1844373 7

0

2000

4000

6000

8000

10000

12000

14000

rural

semi-urban

urban

metropolitan

Interpretation: Total number of Branches of RRBs opened in Rural areas is 12448, In Semi-urban areas number of branch 1844, In urban areas only 373 branches are opened and in metropolitan areas only 7 branches are opened.

9) Do you think that RRBs played important role in the development of rural areas?

location No. of BranchesRural 12448Semi-urban 1844urban 373metropolitan 7

YES 60%NO 30%NO IDEA 10%

60%

30%

10%

0%

10%

20%

30%

40%

50%

60%

YES

NO

NO IDEA

Interpretation : In a particular chosen area 60% peoples think that RRBs played important role in the development of rural areas. 30% peoples not in favor of RRBs and 10% peoples have no idea about it.

10) loan outstanding of RRBs in the last few years (in crore) ?

Year Loans05-06 3971306-07 4849307-08 5889408-09 67802

39713

48493

5898467802

0

10000

20000

30000

40000

50000

60000

70000

2005-06

2006-07

2007-08

2008-09

Interpretation: it is show the loan outstanding of RRBs in the last few years, In year 2005-06 it was 39713 crore, in 2006-07 it was 48493 crore, in 2007-08 it was 58984 crore and in year 2008-09 it was 67802 crore. It is show that loan out standing of RRBs increases continuously.

11) Growth of investment of RRBs in India?

Year % of increases over previous year

05-06 12.02 %06-07 10.88 %07-08 6.33 %08-09 35.22 %

12.02% 10.88%

6.33%

35.22%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

2005-06

2006-07

2007-08

2008-09

Interpretation: It is show the growth rate of investment of RRBs. It is increases as compare to previous year. In 2005-06 it was 12.02% , in 2006-07 it was 10.88% , in 2007-08 it was 6.33% and in 2008-09 it was 35.22%.

12) Are you satisfied with the service of Regional Rural banks in Rural areas?

20%

35%

30%

15%

0%

5%

10%

15%

20%

25%

30%

35%

Highly satiesfied

satiesfied

natural

dissatiesfied

Interpretation: In a particular chosen area 20% peoples are Highly satisfied with the service of Regional Rural Banks, 35% Peoples are satisfied with the service of RRBs, while 15% peoples are not satisfied with the services of RRBs.

Highly satisfied 20Satisfied 35Neutral 30Dissatisfied 15

Findings :-

In my research I have founded following things:-

Regional Rural Banks provide financial help to the low- income people’s

People’s have faith on Regional Rural Banks

Regional Rural Banks are highly success in the development of rural areas.

People’s think that RRBs are better in providing financial help to the poor people’s as compare to commercial banks.

I am found that RRBs make help in providing employment to the rural people’s by providing financial help

Limitations : -

There are some limitations of my study, those are as Following:-

Sample limitation: - which sample is taken by me is very small in size to know exact performance of RRBs in rural areas

Parameters: - All the parameters have not been taken

Time limitation:- I had the shortage of time because of the I was not able to do my study in a good manner.

Reliability:-The data collected by me is not much reliable because many peoples are chosen by me are happy with the work of RRBs.

Awareness: - peoples chosen for study are not fully aware of all the Facilities Provided by RRBs and conditions related to Regional Rural Banks. So, it is very difficult to construct right information from them.

Conclusion:-

To conclude we can say that Regional Rural banks are very help full in the development of Rural areas. They provide Financial help to the Farmers, small scale industries, artisan in rural sector. They provide Loan on very low interest rate as compare to commercial banks.

The commercial banks are closing down rural branches and concertrating on profitability rather then service to the rural poor. On the other hand Regional rural Banks are specially design to fulfill the credit requirement of poor peoples. But RRBs are not just rural credit agencies.

They are more than that, they are a fruitful exercise in bank-Led Rural growth. The RRBs are specially suited to work solely in the rural areas to channels funds and monitor the rural development.

In my study I am analysis the performance of RRBs in the rural areas in the past pervious years. I was found that RRBs provide financial help to the low-income peoples on the large scale. RRBs are highly success full in achieving there objective. They play important role in the development of rural areas. But there are lots of space for improvement in the functioning of RRBs.

Suggestions & recommendations:- In my study I have found some limitation of RRBs that effect the working of RRBs. For solving that problem I can suggest some suggestion or areas of improvement to RRBs that help him in achieving there objective more efficiently.

1. Area covered and Branch expansion : India has about 5 lakh villages. As the scheduled banks have already diverted their attention to urban and metro cities resulting in closure of many rural branches, the only alternative is RRBs, barring the cooperatives. It is essential that all these villages, must come under this banks. Hence, it is essential to multiply the number of branches to cover the entire rural areas of our country.

2. Lender in Rural finance : The RRBs should have the status of the market lender of rural finance. The number of other players must be restricted. Almost all the requirements of the rural population must be met through the RRBs themselves, except long term needs, capital investment, housing etc. other agencies such as SIDBI, SFCs, and NABARD can contribute in specific areas. The RRBs could help by arranging additional flow of funds.

3.Targets and motive: The C/D ratio must be maintained at around 75%. The priority sector advances target should be fulfilled at any cost. All most all the advances must go to the rural funds siphoned off to other sectors. There must be flexibility in the interest rates between different kinds of loans such as crop loans, village housing loans, cottage industries, SSI service industries and others depending upon loan duration, risk factor, etc.

4. Suggestions for state government: The state government should take the following steps in this direction. They should help these banks in the recovery of over dues. They should either reorganize primary agricultural credit societies or set up new service societies to enable the regional rural banks to provide credit for productive activities on a large scale so that the cost of service is reduced.

5. Suggestion for RRBs : The Regional Rural Banks should adopt the following measures for improving their working:

They should extend credit facilities to non-target groups as well so that their profit margin is increased. But such credit facilities may be subject to a maximum limit of 25% of their total outstanding advances.

They should evolve their own recovery system with adequate qualified and trained staff.

They should work out strategies to inculcate banking habits among the Rural people.

BIBLIOGRAPHY:-

1) Bank of Baroda Brochure.

2) Books3) Magazines 4) News Paper

Web sites:-

1) www.wiki.answer.com2) www.Regional Rural Banks india.com3) www.google.com4) www.Bank of Baroda.com

QUATIONERIES:-

Name Age Address Pin Sex Phone

1) Do you know about Regional Rural Banks? Yes No

2) which types of banks you preferred? Private banks public banks

3) What is the main sources of your income?

Agriculture artisans Self employment Other

4) what is your income ?

1 Lack 2-4 Lack

4-5 Lack More than 5) Is RRBs really serve low income clients?

Yes No No idea

Phase of 6) Are you satisfied with the service of Regional Rural banks in Rural areas?

Yes No

7) Do you think that RRBs played important role in the development of rural areas?

Yes No

8) In which area most of the RRBs branches are opened?

Rural Semi-urban

Urban metropolitan

9) Do you think RRBs are help full in providing employment ?

Yes No No idea

10) Regional Rural Banks are different from other commercial banks?

Yes No No idea

11) Growth of investment of RRBs in India in last few years increases or decreases?

Increases Decreases

12) Do you think that facilities provided by RRBs are really benefical for low income clients? Yes No