They have been created with a read to serve primarily the agricultural areas of India with basic banking and monetary services

The Programme's goal is to improve rural livelihoods through community based and sustainable NRM interventions.
It envisages a shift from supply based totally to mortgage primarily based investment guide. The UPNRM initiative presents the opportunity for NABARD to further develop know-how in NRM troubles in the country and become a thematic leader. In light of this, the key coverage purpose of UPNRM is “supporting sustainable NRM targeted tasks to enhance the livelihoods of the socially marginalized / disadvantaged organizations (which includes poor, women, and tribal)” 4.11 NABARD's support FOR INFRASTRUCTURE development Rural Infrastructure promoting Fund (RIPF) NABARD has set up a separate fund titled 'Rural Infrastructure merchandising Fund (RIPF) with a corpus of `25 crore
.
The guiding principle for the operation of RIPF will be to support solely the programmes/ activities that are carried out for promotion of rural infrastructure, which would directly or indirectly, facilitate agriculture and rural development. The eligible institutions for assistance are State Governments., NGOs, CBOs, PRIs, SHGs, SHG Federations and Farmers' Clubs/ FC Federations, Research Institutions, Universities, etc. The support will be only in the form of grant.
NABARD may support the projects fully or partially. 4.11 . 1 key drivers of monetary exclusion of rural banking about 245 million adults in rural india do now not have a financial institution account these days. As depicted in Following Table, this reflects 24% of the total population.
even as 60 million out of 245 million might not need banking services due to the fact they are below the poverty line, diamond believes that about 185 million ?probably bankable? people do not use formal banking offerings because of motives like bad get right of entry to or utilization. four.eleven.2 motives for unprofitable of rural banking in india 4.11.2.1 excessive Non-performing Loans (NPL): Banks have higher non-performing loans in rural regions because rural households have irregular profits and expenditure styles.
the problem is compounded via the dependence of the agricultural economy on monsoons, and mortgage waivers pushed via political agendas. npls from the agriculture zone are 7.7%, in comparison to 3.5% throughout non-agriculture sectors.In order for banks to view rural India as a growth opportunity, rather than a regulatory requirement, a combination of these issues must be addressed.
increasing financial get admission to to rural regions is contingent upon basic conditions which include proper infrastructure and an enabling regulatory framework, as well as innovative thinking on the part of commercial banks. Access issues, however, explain only one part of the problem. Usage is an equally important issue for rural customers. 4.11.2.2 low price ticket size: the common price tag size of each a deposit transaction and a credit score transaction in rural regions is small.
which means banks want extra customers per department or channel to break even. considering the small catchments place of a department in rural regions, generating a patron base with important mass is hard. 4.11.2.three excessive fee to serve: Branches are the maximum used channel in rural regions.
that is because many rural human beings are not literate and aren't comfy the usage of era-driven channels which include atms, phone banking or internet banking.On the other hand, a branch is an expensive channel for banks (Following Table). In addition, rural people, whenever they have access to banks, have Table:4.4 Transaction in Indian Banks Cost Per Transactions Branch Phone ATM Phone (IVR) Internet 48 25 18 8 4 Source: Reserve Bank of India; CGAP, World Bank.
frequent low ticket and cash-based transactions, which increase the overall transaction price for their bank. four.eleven.2.4 higher risk of credit score rating: rural households may have as an alternative irregular and risky profits streams. irregular salary hard work and the sale of agricultural products are the two essential sources of income for rural households.
the poor rural families (landless and marginal farmers) are mainly dependent on irregular salary employment. rural households also have abnormal expenditure patterns. the everyday expenditure profile of rural households is small, with daily or abnormal costs incurred thru the month.

furthermore, a majority of families incur one unscheduled expenditure according to year, with the maximum common reasons being medical or social emergency. In short, the rural customer is generally considered to be a risky one. 4.11.2.5 Issues and Challenges Even if access to formal banking is provided to rural customers, there is no guarantee that these services will be used.

according to a examine carried out via the sector financial institution, many families, even in developed countries, choose not to have a bank account as they do not have interaction in lots of monetary transactions they collect wages in cash, spend in cash and do now not want to be harassed via a financial institution account. To compound the situation many customers in rural India, who have access to and would otherwise choose to use formal financial services, do not do so because the product and provider mixes do no longer meet their desires. the monetary carrier needs of rural customers aren't confined to simply financial savings and credit, as is generally assumed.
their financial wishes are related to their existence cycle wishes, starting from savings to credit to coverage to remittances. In reality, even the financial savings and credit score products currently provided to rural customers do not totally meet their needs. get admission to to financial savings and investment centers is important for the negative. the two vital wishes for the rural bad are micro-savings and common withdrawals.
these wishes facilitate a consumer in constructing capital over the long time, as well as coping with profits shocks within the close to term. however, banks do not provide good enough services to deal with these wishes. the dearth of offerings, consequently, leaves the agricultural negative with little option than to transact with the casual banking marketplace. a examine conducted by means of micro store also concludes that the negative transact with the informal region because it will accept small amounts, provide doorstep carrier, and ensure ease of enrolment. rural clients want loans now not best for effective purposes however additionally for consumption desires (Following Table). A part from agricultural support, rural customers need micro credit for consumption, education and emergencies.
though banks offer purpose unfastened loans (personal loans and credit playing cards) in city regions pretty liberally, in rural regions sanction of such loans is extensively confined. therefore, the negative increase those loans via the informal financial system (it's far really worth noting that those loans taken from the informal system are almost continually repaid or renewed12). in addition, larger families need occasional excessive fee micro-agency loans for small capital investment.
Though banks offer these loans, they require excessive documentation and time-consuming processes which discourage customer applications. 4.12 KEY PERFORMANCE INDICATORS AND GROWTH OF RRBs Table presents the key performance indicators and growth of RRBs from year 2006-07 to 2010-2014. Table: 4.5 PARAMETERS 2006-07 2007-08 2008-09 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 1.63 Owned Fund 7285.98 8732.59 10895.73 12247.16 13838.92 13 Deposits 83143.55 99093.46 120184.5 145035 166232.3 14.6 Borrrowings 9775.8 11494 12733.8 18770 26490.81 41.1 Investments 45666.14 48559.54 62629.45 79379.16 86510.44 8.98 Gross Loan (O/s) 48492.59 58984.27 67858.48 82819.1 98917.43 19.14 Loan Issued 33043.49 38581.97 43445.59 56079.24 71724.19 27.9
CD Ratio 58.32 59.52 56.46 57.1 59.51 Accumulated Losses 2759.49 2624.22 2325.59 1775.06 1532.39 13.67 Profit (Before Tax) 926.4 1383.68 1859.36 2514.83 2420.75 3.74 Loss 301.25 55.58 35.91 5.65 71.32 116.32 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 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 1.8 2.05 Recovery % 79.8 80.84 77.76 80.09 81.18 Net Worth 4526.48 6107.37 8570.04 10472.1 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 3.7 3.78 2.16 Source: Reports of NABARD and RBI Table: 4.6 Parameters 2011-12 2012-13 2013-14 * % Growth No. of RRBs 82 64 57 -- No.
of Branches 16909 17861 19082 -- Districts covered by RRBs 638 635 642 Staff 74291 76246 80075 5.02 Owned Fund 16462 19445 22103 13.67 Deposit 186336 211488 239503 13.25 Borrowings 30289 38073 51208 34.50 Investments 95975 108548 110514 1.81 Gross Loan (O/s) 116385 139652 159302 14.07 CD Ratio 62.5 64.8 66.51 2.63 Accumulated Losses 1332 1091 949 -13.02 RRBs in Profit 79 63 57 Profit Amount 1886 2275 2694 18.70 RRBs in loss 3 1 0 Loss 28.87 2.07 0.00 Gross NPA 5859.12 8330.03 9656.63 15.93 Gross NPA % 5.03 6.08 5.97 Recovery % (as on 30 June of previous year) 81.60 81.17 81.89 Net Worth 15129.44 18354.78 21199.62 15.50 Branch Productivity 17.90 19.52 20.90 7.07 Staff Productivity 4.07 4.57 4.98 8.97 Source: NABARD Report from 2005-2014 4.12.1
restructuring techniques the economic viability of rrbs has engaged the eye of the coverage makers on occasion. in reality, as early as 1981, the committee to review arrangements for institutional Credit for Agriculture and Rural Development (CRAFICARD) addressed the issue of financial viability of the Rural Regional Banks.
The CRAFICARD recommended that 'the loss incurred by a Rural Regional Banks should be made good annually by the shareholders in the same proportion of their shareholdings'. though this recommendation become now not established, below a scheme of recapitalisation, financial help became furnished by means of the shareholders in the share in their shareholdings. sooner or later, some of committees have come out with exclusive pointers to cope with the financial non-viability of rural regional banks.
for instance, the working organization on local Rural Banks (Kelkar Committee) in 1984 recommended that small and uneconomic RRBs ought to be merged inside the interest of economic viability. five years down the line, in a similar vein, the rural credit overview committee (khusro committee), 1989 talked about that 'the weaknesses of rrbs are endemic to the device and non-viability is built into it, and the only choice become to merge the Rural Regional Banks with the sponsor banks.

the objective of serving the weaker sections effectively might be executed most effective by means of self-maintaining credit score establishments'. The Committee on Restructuring of RRBs, 1994 (Bhandari Committee) identified 49 Rural Regional Banks for comprehensive

restructuring. It recommended greater devolution of decision-making powers to the Boards of Rural Regional Banks in the matters of business development and staff matters.
the option of liquidation once more turned into mooted via the Committee on Revamping of RRBs, 1996 (Basu Committee). The expert group on Rural Regional Banks in 1997 (Thingalaya Committee) held that very weak RRBs must be viewed one by one and possibility of their liquidation be known. They might be merged with neighbouring RRBs.

The professional Committee on Rural credit, 2001(Vyas Committee I) changed into of the view that the sponsor bank need to make sure necessary autonomy for local Rural Banks in their credit score and other portfolio management device. ultimately, some other committee below the Chairmanship of Chalapathy Rao in 2003 (Chalapathy Rao Committee) endorsed that the entire gadget of Rural Regional Banks can be consolidated whilst maintaining the advantages of regional character of these institutions. As a part of the procedure, a few sponsor banks can be eased out.

The sponsoring establishments may include other approved financial institutions as properly, in addition to industrial banks. The institution of CMDs of pick out Public quarter Banks, 2004 (Purwar Committee) endorsed the amalgamation of local Rural Banks on local foundation into six industrial banks - one every for the Northern, Southern, jap, Western, relevant and North-eastern regions.

as a result one finds that a number of alternatives had been suggested starting with vertical merger (with sponsor banks), horizontal merger (amongst RRBs running in a particular location) to liquidation with the aid of exceptional committees that have gone into the difficulty of financial viability and restructuring strategies for the Rural Regional Banks. greater recently, a committee under the Chairmanship of A.V Sardesai revisited the difficulty of restructuring the nearby Rural Banks (Sardesai Committee, 2005).

The Sardesai committee held that 'to improve the operational viability of Rural Regional Banks and take advantage of the economies of scale, the route of merger/amalgamation of Rural Regional Banks can be taken into consideration taking into account the perspectives of the diverse stakeholders'. Merger of Rural Regional Banks with the sponsor bank is not furnished within the Rural Regional Banks Act 1976.

Mergers, despite the fact that allowed, could no longer be a desirable way of restructuring. The Committee become of the view that merging a nearby Rural Banks with its sponsor bank might cross towards the very spirit of setting up of local Rural Banks as local entities and for presenting credit normally to weaker sections.

Having mentioned various alternatives for restructuring, the Committee was of the view that 'a trade in sponsor banks may also, in some instances help in improving the performance of nearby Rural Banks. A change in sponsorship can also, inter alia; improve the competitiveness, paintings subculture, control and performance of the concerned nearby Rural Banks'.
Against this backdrop, a number of issues need empirical probing. Such as, which are the Rural Regional Banks that need focus and whether for them the sponsor bank has really to be made accountable. All these issues fall under the broader questions of what factors drive the performance of Rural Regional Banks? and do the sponsor banks have a role to play? Section II reviews the literature on factors affecting performance of a commercial bank in general and also in the context of Rural Regional Banks. 4.13 THE RELIEF MEASURES AVAILABLE TO FARMERS some of alleviation measures are already to be had in the schemes subsidized both with the useful resource of the authorities of india and the kingdom governments. they encompass the calamity comfort fund.
National Family Benefit Scheme, RaithaSanjeevani Scheme, Pledge Loan Scheme, RashtreeyaKrishiBhimaYojana, Minimum Support Price and 'SankataHarana' Scheme implemented by the IFFCO. the measures taken by using the government of karnataka encompass seeds and other agricultural products at backed prices to small and marginal farmers, training of new agricultural technology, encouraging organic farming, disbursing crop loan at 3% in business banks.
And profitable scheme aimed at increasing agricultural productivity (Anonymous 2011). 4.13.1 INSURANCE SCHEME A number of insurance schemes are available both for farmers and public. most of these schemes are guided by means of the regulations applicable in trendy to any insured persons.
Some of the insurance schemes like (i) Janatha Rural Personal Accident Insurance, (ii) RajarajeswariMahilaKalyana Insurance, (iii) Bhagyashree Female Child KalyanaYojane, (iv) Insurance for agriculture Pump Sets, (v) Horticulture/Plantation/Floriculture/Flower Insurance Scheme (vi) Insurance on Livestock, (vii) Insurance on Poultry, (viii) Insurance on Carts, (ix) Standard Kissan Package Policy, have all been offered by the Oriental Insurance Company which directly aimed in covering the farmers and their families.
The new India Assurance Company also has (i) Gram ArogyaYojane, (ii) Insurance on livestock, (iii) Insurance on Poultry, (iv) Insurance on Krishi Pump sets and (v) Janatha Rural Personal accidental Insurance offering some competitive premium range. The life Insurance Corporation of India also has JanashreeBimaYojana. 4.13.2. RASHTRIYA KRISHI BIMA YOJANA (RKBY) The Comprehensive Crop Insurance Scheme was implemented in the state from 1985 to Kharif 1999.
Subsequently, a new scheme of National Agricultural Insurance Scheme also called RashtriyaKrishiBimaYojana was introduced by the Government of India during 1999-2000 to Rabi. However the State implemented the scheme from Kharif 2000. the principle objectives of the scheme are to offer insurance coverage and financial assist to farmers within the event of failure of any of the notified crops because of natural calamities, pests and sicknesses and to inspire farmers to adopt innovative farming practices, with high fee inputs and improved technology, besides to stabilize farming earnings in particular in the catastrophe years. in the event of the demise of the farmer due to sudden event the agricultural mortgage he has availed from various monetary establishments which includes cooperative societies is waived off and the compensation is paid to the victims' family. 4.13.3 MINIMUM SUPPORT PRICE (MSP) The Minimum Support Price is one of the important mechanisms developed and implemented jointly by the Central and State Government over years to avoid distress sale of farming produce.
This implemented for mandated crops like paddy, jowar Maize, Bajra, tur, green gram, black gram, soybean groundnut sunflower, Bengal gram and cotton. However, in Karnataka market intervention scheme for potato, onion etc. is in operation. Likewise, floor price scheme for selected commodities like tur, copra etc. is implemented. 4.13.4.
NATIONAL FOOD SECURITY MISSION In order to increase the productivity of farm produce and to give ultimate advantage to the farmers, the Government of India through Ministry of Agriculture has introduced various programmes in which National Food Security Mission (NSFM) is one of the major programme formulated to increase the productivity of pulses. 4.13.5. SANKATA HARANA This is a novel scheme introduced by IFFCO during 2001-02.
Under this scheme any farmer purchasing fertilizers through cooperative societies would qualify for the relief for accidental death. 4.13.6. PERSONAL ACCIDENT INSURANCE SCHEME (PAIS) FOR KCC HOLDERS Personal Accident Insurance Scheme covers Kisan Credit Card Holders. The United India Insurance Company Limited is the nodal organisation for implementation of this scheme in karnataka state.
The progress achieved, as of December 2001 is 2, 49,704 persons with a premium of 71.61 lakhs. The new KCC holders are to be covered under PAIS. 4.14 FINANCIAL PERFORMANCE OF THE RRBs AS ON 31 MARCH 2013 Rural Regional Banks together with commercial and co-operative banks, have a crucial role in the multi-agency approach for delivery of agriculture and rural credit. Being local level institutions, RRBs are ideally suited for achieving finance inclusion as well.
Amalgamation, recapitalization, hobby subvention, etc. are a number of the measures taken which will give a boost to the nearby Rural Banks for gambling more function in agriculture, rural lending and economic inclusion. some of policy tasks have been taken to facilitate diversification in their commercial enterprise operations into new regions.

flip-around exercise commenced extra than a decade in the past with infusion of sparkling capital, most important policy modifications and various forms of capability building and institutional development led to significant development in functioning of Rural Regional Banks. considering the amazing capability due to their presence at some point of the us of a, government of India has initiated the manner of restructuring of Rural Regional Banks to enhance their functioning, obtain the economics of scale and to make certain better managerial control.

During the year 2012-13 31 Rural Regional Banks were amalgamated into 13 Rural Regional Banks in 9 states. As a result, the total number of Rural Regional Banks as on 31st March 213 stood at 64. 4.14.1 PERFORMANCE OF RURAL REGIONAL BANKS AS ON 31ST MARCH 2013 The performance of Rural Regional Banks as on 31st March 213 under select key parameters are · Rural Regional Banks have reached the business level (Deposits and Loans) of Rs. 3, 51,295 crores. · Total deposits aggregated to Rs.2,11,458 · The loans outstanding stood at Rs.1,39,837 crore · Rural Regional Banks earned an operating profit before tax of Rs.3,281 crores · Number of profit making Rural Regional Banks stood at 63 · Number of loss making Rural Regional Banks stood at1 · The total amount of accumulated losses decreased by Rs.321 crore and stood at to Rs.1012 crore · Loans issued under agriculture amounted to Rs.64,903 crore · Recovery deposits slightly declined to 81.32% as on 30th June 2012 (81.60% as on 30th June 2011. · Gross NPA to total loan outstanding in creased to 5.65% (5.03%as on 31st March 2012) Net NPA increased to 3.40% (2.98% as on 31st March 2012) · Net worth of Rural Regional Banks as a system improved to Rs.18,292 crore as 31st March 2013 from Rs.15,129 crore as on 31st March 2012 · The Rural Regional Banks paid an Income Tax of Rs.896 crore durng 2012-13 as against Rs.663 crore during 2011-12 4.14.2
COCERAGE OF DISTRICTS BY REGIONALA RURAL BANKS As many as 635 out of 640 districts are covered by Rural Regional Banks as on 31st March 2013 as against 638 districts as on 31st March 2012. BRANCH NETWORK OF REGIONALA RURAL BANKS The Number branches of Rural Regional Banks increased to 17856 as on 31st March 2013 as against as on 31st March 2012 4.15 SOURCES OF FUNDS 4.15.1
Owned Funds The Owned funds of Rural Regional Banks comprising share capital, share capital deposits received from the stakeholders toward recapitalization support and the reserves stood at Rs.19,304 crore as on 31st March, 2013 as against Rs.16,462 as on 31st March, 2012. the increase in owned price range to the music of 2,842 crore was specially resulting from accretion to reserves of the earnings making rural nearby banks having no accumulated losses. the share capital and share capital deposits together amounted to Rs.6,174 crore (forming 31.98% of total owned funds) while the balance amount of Rs.13,130 crore (Forming 68.02% of total owned funds) represented reserves. 4.15.2 Deposits Deposits of Rural Regional Banks increased by Rs.25122 crore from Rs.1,86,336 crore as on 31st March 2012 to Rs.2,11,458 crore as on 31st March 2013 registering growth rate of 13.48%. 4.15.3
Borrowings Borrowings of Rural Regional Banks increased by Rs.7979 crores, from Rs.30, 289 crore in 2011-12 to Rs.38268 crore during 2012-13. The growth rate of borrowing was 26.34% as on 31st March 2013 as against 14.34% 31st March 2012. Borrowing constituted 26.37% of the gross loan outstands during 2012-13 as against 26.02% during 2011-12. 4.16 UTILISATION OF FUNDS 4.16.1
Loans Issued As on 31st March 2013, the loans issued by all Rural Regional Banks increased in absolute terms by Rs. 19,624 crore. Total loans issued by all Rural Regional Banks increased to Rs.1, 02,162 crore from Rs.82,538 crore as on 31st March 2012 registering a growth of 23.78%. 4.16.2 Loans Outstanding As on 31st March 2013, loans outstanding increased by Rs.23,452 crore to Rs.1,39,837 crore from Rs.1,16,385 crore as on 31st March 2012 registering a growth rate of 20.15%. 4.16.3
Credit Flow to Agriculture Rural Regional Banks are actively participating in the credit flow to agriculture sector. Disbursement of agriculture credit with reference to the total credit for the lost five years revealed as Table: 4.7 CREDIT FLOW TO AGRICULTURE Year Total Credit Agricultural Credit % of Agri. Credit to total credit % of Growth Agricultural Credit Total Credit 2008-09 43367.13 26439.17 61 13.77 12.4 2009-10 56079.24 34639.94 62 31.02 29.31 2010-11 71724.19 43965.43 61 26.92 27.9 2011-12 82538.39 53058.14 64 20.68 15.08 2012-13 102161.7