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

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He made a detailed study on various aspects kike staff training, problems of employees, delegation and decentralization, communication, management-employees relationship, etc. which will affect the management of RRBs. He suggested the need for a humanitarian outlook and attitude towards employees by the officers. Dharma Rao, (1991), has conducted a study on the impact of bank finance on the non-farm sector.
The study was based on the bank finance on non-farm sector made by VisakhaGrameenaank of Andhra Pradesh to tot selected sectors like small business activity, transport and artisan activity etc. He initiate that the level of investment, income and consumption expenditure have shown a marked change but the level of increase in employment and assets position was relatively lower. Krishnan C., (1992), in his study has found that the existence of RRBs is inevitable to meet the financial needs of the rural people.
He stated that the institution performance like RRB which is vested with the longer socio-economic goal should not be judged in terms of the conventional financial yardstick, but more correctly in terms of the socio-economic obligation which they are deemed to achieve. It also noticed the problem of mounting over dues. It was suggested that instead following the drastic measures like total waiving or writing off it is better to introduce rescheduling or re-phasing of the loans.
Kumar Raj, (1993), applied a study on the subject “Growth and Performance of RRBs in Haryana”. On the idea of the study of RRBs of Haryana, it had been found that there was a colossal increase in deposits and outstanding advances. The investigator felt the necessity to extend the share capital and to confirm economical of distribution channels of finance to beneficiaries.
Roy, (1994), in his study evaluated the structure and implementation of the RRBs in WestBengal. The study after tracing the growth of RRBs in India, attempted to test how far theobjectives of RRBs have been achieved. He has reviewed the progress of RRBs in respect ofcapital, deposits, advances, income, expenditure, recovery performance and profit or loss.
Srivasthava, Prakash and Lal, (1994), in their article “Role and Future of RegionalRural Banks in supplying rural credit”, have examined the economic viability of RRBs, ruralcredit provided by the RRBs and constraints responsible for losses. They found that out of196 RRBs, 150 have been continuously running at a loss. Till the end of March 19993, thecumulative figure of deficit was 930 Crore. In 1995, RBI had set up a working group under the chairmanship of ShriS.Padmanabhan to review the banking supervision system. The Group, while re-emphasizingthe primacy of on-site inspection, encouraged switching over to a system of ongoingsupervision.
It counseled a method of periodical full-scope 'on-site examinations' supplemented by Associate in Nursing in-house 'off-site observation system' in between 2 statutory examinations. The unit counseled positioning oversight for social control of correction of deviations. it had been determined that the periodic and full scope statutory examinations ought to target core areas of assessment, viz.,
(a) financial condition and performance (b) management and operating condition (c) compliance and (d) summary assessment in line with the internationally adopted capital adequacy, asset quality, management, earnings, and liquidity. V. A. Panandikar, (1995), conducted a study to assess the performance of top five rural banks of India (in terms of deposits) in 1995.
This study brought a few things into limelight. (i) rural regional banks have become very important credit agencies especially in the backward states, where the extent of banking coverage was inadequate (ii) majority of the Rural Regional Banks have confined their credit to weaker sections (iii) The cost structure of the rural regional banks was definitely lower than that of a commercial banks. Further, the study indicated that the present nexus between Rural Regional Banks and commercial banks may be continued for further development.
It strongly felt that National Bank for Agriculture and Rural Development (NABARD) should be identified as an apex body for controlling and regulating the activities of Rural Regional Banks and to imbibe organizational competence among them. Pariyan, (1995), in his study has made an attempt to reveal the performance of RRBs in India in Genera and ShekhawatiGrameen Bank in particular.
The study indicated that the impact of the bank's loan operations on the transformation of rural economy is modest but significant. Another interesting empirical study was conducted by VardeVasha (1995) to analyze the overall performance including profitability of Rural Regional Banks. For this purpose, a sample of 40 Rural Regional Banks was picked-up.
This take a look at accompanied elaborate and complex technique of ascertaining distinct ratios for the purpose of studying the profitability of nearby rural banks. It indicated that the profitability overall performance of nearby rural banks showed increasing trend. This became specially due to the decline in manpower invoice and other operating charges.
The study also compared the manpower and operating ratio of Rural Regional Banks with those of commercial banks and concluded that it was lower with commercial banks. This was mainly because of higher volume of business handled per employee of commercial bank as compared to its counterpart in Rural Regional Banks. This study felt that this position could be reversed in future, if Rural Regional Banks enlarged the amount of business.
The study came out with a constructive suggestion that local people should be allowed to participate in equity and no-target group (rich farmers) be lured for the purpose of mobilizing additional funds. Kaushik, (1996), in his study examined the role of RRBs in the poverty alleviation in Haryana by the functioning of two RRBs namely Haryana KshetriyaGrameena Bank and Bhiwanin and GurgonGrameena Bank.
He found that low level of pre-credit income of the people, credit inadequacy, lack of co-operant factors of production, lack of skill and infrastructural facilities and marketing constraints are the main reasons which blocks the RRBs objectives to improve poverty, particularly in the study region. His finding revealed that income generation affect is significant in agricultural subsidiary activities such as animal husbandry, rural industry, small business etc. A. K.
Jai Prakash, (1996) conducted a study with the target of analyzing the role of RRBs in Economic Development and discovered that RRBs are enjoying an important role within the field of rural development. Moreover, RRBs were a lot of economical in disbursal of loans to the agricultural borrowers as compared to the business banks. Support from the state Governments, native participation, and correct management of loans and gap urban branches were some steps counseled to form RRBs more economical. H.S.Shylendra, (1998), in his study regarding “Reorganization of Rural Regional Banks” explained that the revamping strategy for RRBs ought to aim at consolidating the present structure with new localized policy thrusts and orientations
Innovations and flexible methods in lending, recovery and deposit mobilization should be the hallmark and key to the success of the turnaround strategy. At the same time, the basic characteristics of the RRBs should remain developmental with strong pro-poor leanings. Community and group based lending and forging active developmental collaboration with the NGOs should be the new focus areas.
Above all, what is needed is an attitudinal change among the employees of RRBs that it is possible to attain viability even while banking with the rural poor. Sonara, (1998), conducted a study on the evaluation and growth of RRBs in Gujarat in organizational set up of the banks and discussed also the financial resources mobilization, lending operations, credit-deposit ratio, and recovery performance of five selected RRBs after explaining various components of income and expenditure.
Puhazhendhi and Jayaraman, (1999), analyzed the overall performance and demanding situations earlier than the financial institution in regards to rural credit score delivery machine in India. They said that development of the agricultural transport gadget in the country has metamorphosed from monopoly of co-operatives to the induction of commercial banks and status quo of Rural Regional Banks for improving the outreach and ensuring the access to credit in rural areas.
With the implementation of economic sector reforms, the accent is on making certain the money health of the system. They more discovered that innovations in rural credit delivery have associate degree impacton agricultural production and reduction of impoverishment attributable to exaggerated flow of credit. fast the pace of capital formation in agriculture, infrastructure development with target transportation and promoting and making certain credit discipline can change the agricultural sector to soak up additional credit from institutional sources.
in line with them, the focal point have to be on techniques which can be required for tacking troubles along with sustainability and viability, operational efficiency, recovery performance, small farmer coverage and balanced sectorial development. Ramappa, (1999), analyzed the overall performance of local Rural financial institution inside the Rayalaseema location of Andhra Pradesh.
The progress of RRBs in respect of branch expansion, deposits, advances, income expenditure, recovery performance and profit or loss was reviewed as well as the nature of enlistment of rural savings through RRBs and the causes of their profit or losses were probed. The study revealed that RRBs have achieved a remarkable progress in respect of branch expansion, credit deployment and geographical coverage.
The expansion of banking had been mostly in neglected areas. Abdul Noorbasha and Jyothi, (2001), conducted a study pertaining to the financial management pattern of Chaitanya grameena bank, Tenali of Andhra Pradesh. The study showed that most of the Rural Regional Banks were nonviable.
To improve the viability of these banks, they suggested allowing rural regional banks to lend money to public bodieslike Scheduled Tribes and Castes ,Corporation, housing boards, village panchayats, etc; and in turn, increase their earnings. Bapanna, (2001), studied the association and working of four rural regional banks in Rajasthan.
The observe came to the belief that, there has been awesome growth in branch expansion, deposits and advances. The credit score deposit ratio of local rural banks became better than that of commercial banks. The revival overall performance of the banks turned into better in respect of non-agricultural quarter in comparison to agricultural sector. Nitin Bhatt and Y. S. P.
Thorat, (2001), in the study of the institutional dimension of reforms discovered that the efforts to reform India's failing Rural Regional Banks (RRBs) have had restricted impact, as a result of reformers have paid very little attention to the institutional dimensions of the issues facing the banks. Few efforts were created to revamp the perverse institutional arrangements that gave rise to incompatible incentive structures for key stakeholders, like political leaders, policy manufacturers, stockholders, bank staff, and shoppers.

They counseled that future leg of reforms specialise in orientating the incentives of those stakeholders by giving larger importance to the RRBs internal structure contexts and bigger policy environments. Nandan, (2002), in his study determined that the performance of the RRBs throughout the last twenty years is mostly attributed to their lack of economic orientation.

Instead of adopting international best practices in micro finance, especially in terms of reducing transaction costs for clients and lending to individuals based on an appraisal of their ability and willingness to repay, these internally inefficient banks made loans based on political and social considerations that caused the very fundamentals of prudent underwriting.
Given their poor portfolio performance over the past decade, the majority of these banks had been declared as financial disasters as development experts search for alternative ways to deliver rural financial services. Ramola, (2002), in a study on Role of Rural Regional Banks in the reconstruction of Uttaranchal state revealed that RRBs have made significant progress in extending services in rural sector.
Although, banks have made several innovations in the field of rural lending, due to lack of rural consultancy cell most of the rural masses are not aware of these innovations. Lakshmi Narasaiah has studied the structure, growth and performance of rural banks in India from 1975 to 1990. According to his study RRBs are poor man's banks which identify the problems of neglected sections of the community and endeavor to mitigate their difficulties by extending financial assistance. NagiUddin, (2003), has tried to study in intensity the working and performance of RRBs in the state of Uttaranchal.
The critical components of the operating of those banks which include department expansion, deposit mobilization, profitability etc. has been analyzed in detail. He has also made an attempt to study the impact of RRBs on the rural economy of the state through some selected parameters and the internal and external constraints which were responsible for growth of the banks. Report on Asian Development Bank on RRBs, (2003), found some key issues i.e, misalignment of ownership and management, risk aversion and mission drift, high cost operations, inadequate loan loss provisioning, low capital adequacy, low profitability, high accumulated losses, competition with sponsored banks and for that RRBs need for capacity building.
RRBs have high cost resources with inadequate training, low productivity and insufficient systems and technology support. These issues will need to be addressed on priority if RRBs are to be revitalized. Jagan Mohan, (2004), has made a study to assess the banking by dividing the rural and semi urban areas of the country and to point out the candidate institutions for strengthening rural credit in the light of the challenges in an era of reforms.
Analyzing the trends in rural banking and credit in the country, he found that banking usage among the Indian households in general is 35.50% and rural households in particular are only 30.10%. It reflects the latent demand for general banking needs in rural as well as urban segments. He also noticed a continued migration of rural/semi-urban savings to urban/metro centers, thereby causing a bank divide.
He counseled that a minimum benchmark CD quantitative relation of hour ought to be envisaged all told districts of the country to obviate the regional or urban/rural imbalances. On the idea of the study, his stress the requirement for a robust and versatile structure for rural monetary establishments likes Rural Regional Banks in rural and semi-urban segments.


Report of the Internal Working Group on RRBs, (2004), concluded that international experience of restructuring rural financial institutions indicate that only viable financial institutions with sustainable financial services can increase their outreach. The issue of viability is thus not only of relevance to the health and survival of the institutions but to the poor themselves.

Accordingly, since repositioning of RRBs in Indian financial system would warrant major initiatives to be taken to improve their financial viability and sustainability, the suggestions above reflect the same. International experience of various countries with regard to this segment is being looked into, for identifying new ideas / methods, which could be employed in the Indian context with suitable modifications. However, resolving human resource issues would be the key to such an exercise. Pati A.P, (2005), has made an effort to study the performance of RRBs in the North East Region and Assam in the liberalized scenario.
In this study the importance aspects of working of RRBs in this region such as deposit mobilization, resource mobilization, resource deployment, profitability etc. had been critically examined. The study found that credit recovery and growing operating expenditure are the main stumbling blocks for their growth in profitability. He stated that the future performance of RRBs will depend upon their ability to manage the transition to a technology oriented and customer driven entity.
Sukanya Bose, (2005), briefly reviewed the 3 phases of Regional Rural Banking in Asian nation i.e., the beginning and growth section (1976-1990) that saw rise of the RRBs activities; the reform section (1991-2002/03) that raised the gain of those banks at the value of huge rural disintermediation, significantly of the targeted receiver categories; and therefore the most up-to-date section of stock taking and maybe some position to strikea balance within the riddle of “viability versus outreach”.

Abhiman Das and SaibalGhosh, (2005), in their article revealed that according to economic theory, there are at least three signs of excess capacity in banking: (a) low mortgage-to-asset ratio, (b) low profitability, and (c) excessive in step with unit general cost. If excess capability exists, it is going to be easiest to identify via these indicators, at nearby rural banks.

Using bank-specific data on Rural Regional Banks in India for the period 1991 to 2001, it was suggested that, if excess capacity exists, it was more likely to have an adverse impact on financial performance of RRBs. Acharya S. C. and Mohanthy A. K., (2006), have made a study on operational analysis of Rural Regional Banks. The study was based on the performance of RRBs in Orrissa.
The study explained the purpose and logic of the already existing credit institutions, their strengths and weaknesses in achieving the goal for which they were set up, the changing environment which necessitates the setting up of new institutions called RBs and an analysis of their operation at the all India level and in the state of Orrissa. The study found that thought the operation of RRBs in Orissa is satisfactory, the recovery performance needs improvements. P. S.
Badal, (2006), in his article about Agricultural credit, explains the issues in rural credit that there are three major issues before the rural monetary institutions which need attention for making the agriculture sector make a significant input to the economic growth of the country - (1) The quantum of flow of institutional credit to agriculture has to be increased; (2) The access to formal credit for the rural poor and disadvantaged and agriculturally less developed regions has to be improved; and (3) the economic possibility of rural banking system has to be ensured over time. First, the flow of credit to agriculture sector has to be increased.
efficient agriculture calls for investment in complementary property like irrigation, farm machinery, and livestock. but, irrigation development is pivot to all aspects of agricultural improvement. Sixty in keeping with cent of the internet place sown in the usa is rain fed and irrigated. similarly, exploitation of irrigation capability through investments in watershed development, developing minor irrigation sources like tanks and wells and development and promotion of technology for efficient water management should receive priority in formal lending.
The credit transport system has been determined wanting with appreciate to assembly competently credit requirements of high-tech and high price agriculture, cost addition, processing and advertising activities of the farmers. Apart from crop sub-sector, the financing of activities like animal husbandry, fisheries, agricultural services will require vast credit support.
New loan products such as pledge financing, marketing credit, loan against warehouse receipts, export credit and challenge capital for agricultural entrepreneurship shall ought to be promoted to fulfill the challenges posed through globalization. The present credit delivery system only emphasizes production credit. Thus the imbalance between production and post-production credit needs to be rectified.
Secondly, the outreach of formal agricultural credit is not adequate to rural poor, small and minor farmers and agriculturally less developed areas. Linking of self-help companies (SHGs) with financial establishments with the help of non-governmental employer (NGOs) has yielded fantastic consequences within the shape of asset introduction, increased income and greater employment for these disadvantaged sections of the society.
Such successful examples of forming SHGs encouraging them to save and provide micro-finance have to be replicated. The consumption requirements of the poor need to be integrated with production requirements Crop insurance programmes need to be more efficient for taking care of risks arising out of crop failure. Tenants lack access to credit because tenancy agreement is not in written form.
If the land-lease market is made free, it would help such farmers in procuring formal credit. Finally, the price of borrowings to the farmers is also an significant issue affecting the flow of credit to agriculture sector. The rate of interest to agriculture has been recently brought down to 9 per cent for loans less than Rs 50,000 and 10.5 to 12.5 per cent on loans above Rs 50,000.
The price of credit from cooperative institutions is still high because at every tier of the three tier structure some costs and margins are added and secondly, cooperatives offer higher interests on deposits. The NABARD has amended its 1981 act to provide refinance directly to District Central Cooperative Banks. Yet the transaction cost is high, which need to be reduced by introducing new products like group lending, strengthening of SHGs-Bank linkages and improving efficiency of the staff through information technology (IT) tools and increasing the volume of business and providing multi-purpose credit facility.
Kisan Credit Card scheme has helped reducing transaction costs by providing access to all types of short term credits. Some procedural modifications are also required to reduce the cost of transaction cost, such as simplification of forms, allocation of more powers to branch managers, introduction of compound cash credit limit, cash disbursements of loans without tying it with kind components, dispensation of 'No Due Certificate', lending through non-bank financial companies etc.
Flexibility in the loans with regard to use and repayment can also increase the flow of agricultural credit and reduce transaction costs. The globalization of agriculture is underway with a number of changes such as changes in livelihood pattern, pattern of holdings, high-value agriculture, agribusiness development and food retailing. the rural credit institutions should shed their inhibitions to guide the technique of agricultural diversification and commercialization.

A progressive integration of monetary markets with emphasis on self regulation, accountability and autonomy of the institutions with social responsibility will be required. Abdul Hadi and KanakKantiBagchi, (2006), have made a detailed examine on the overall performance of local Rural Banks inside the West Bengal. The look at made a evaluation of the progress of the RRBs inside the country, in phrases of enlargement of department, credit score expansion and deposit mobilization.

By analyzing the relevant secondary information the study unconcealed that RRBs are additional or less triple-crown in increasing stretch of institutional credit in rural areas. J. S. Sura, (2006), has created a shot to investigate the efficaciousness of RRBs in Asian nation. The objectives of this paper were to assess the expansion pattern of RRBs, to look at the credit distribution and geographical distribution of RRBs.

The period of study is 197-2005. it had been noticed that since the RRB is meant to be a bank for poor individuals, its presence altogether the states of the country particularly in beneath developed states will build things higher.

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