Rural sector occupies an important place in the Indian economic system,
as three out of four Indian live in rural areas and five out of six persons living
in rural areas are dependent upon agriculture as means of income. Agriculture
along with its related activities contributes around 37 percent to National Income.
Hence, the development of agriculture would mean of development of rural areas,
agriculture and related activities as a sector and various classes of people residing
in the country areas has been the basis of policy formulation in the successive
Five Year Plans of the country.
The agricultural production and productivity relies
on the adoption of new farm techniques and technologies. The adoption of new
tools practices relies on the availability of larger and larger amount of funds,
and this is largely influenced by the structure and operations of the financial
institutions located in the country areas. In this regard, India
has been successful in developing one of the largest rural banking systems in
the world. The National Bank for Agricultural and Rural Development (NABARD) is
the apex institution which is looking after all matters concerning policy,
planning ,operation in the field of credit for agriculture and other economic
activity in rural areas. Public policy was aimed at meeting rural credit needs and
pushing out the informal sector and the exploitation to which it subjected
STRUCTURE OF RURAL
BANKING IN INDIA
The rural banking structure consists of three banking institutions
providing finance at the grass root level viz. Co-operatives, Commercial Banks
and Regional Rural Banks. The above chart presents the rural banking structure
The co-operative credit structure comprises of two types; the one engaged
in the short term and medium term credit and the other in a long term, credit.
The short term credit structure is federal in nature, based on 3 tier pattern
with the apex banks at the state level, Central Co-operative Banks at the
district level and co-operative credit societies at the village level. The
State Co-operative Banks are the apex level institutions aimed at financing the
District Cooperative Central Bank (DCCB). DCCBs in turn finance the
co-operative credit societies at the primary level. The long term credit
structure is either Federal in character with State Co-operative Land
Development Banks (SLDBs) as the apex institutions at the State Level and
Primary Land Development Banks (PLDBs) or branches of SLDBs at the Taluka/block
level. The GSLDB have unitary structure having branches located at the taluka
Thus, the field level co-operative institutions which provide credit to
individual borrowers comprises of (i) Primary Agricultural Credit Society (PACS)-Providing
both short term and medium term credit to their members and (ii) PLDBs or
branches of SLDBs dispensing long term credit to their members. The
reorganisation programme of PACS was introduced in early sixties to make them
Based on the
recommendations of CRAFICARD, the NABARD has designed a set of guide-lines for
planning the future development of re-organised societies in a phased manner. State
Bank of India (SBI) and its associates and nationalised banks comprises the
Public Sector banks. The CBs provides both short-term and long-term loans to
farmers and also finance related activities like marketing, processing, storage
etc. in rural areas through their rural branch net work.
Regional Rural Banks
as new institutional agency were established in 1975, to meet the credit requirements
of rural poor, which were neglected hither-to both by co-operatives and CBs. The organizational structure for RRB’s differs from
branch to branch and depends upon the nature and size of business done by the
of Regional Rural Bank are the following:
To provide credit and
other facilities in rural areas, specifically to the small and marginal
farmers, agricultural laborers, artisans and small entrepreneurs so as to
develop agriculture, trade, commerce, industry and other productive activities
in the rural areas.
To mobilize rural saving
and inculcate banking habits in the rural areas.
To provide employment to rural
educated youth who have the requisite orientation to look after the needs of
the rural folk.
To reduce the costs of
Regional rural banks
To achieve the stated objectives as above, the
regional rural banks undertake such functions that contribute to the
socio-economic development of the rural people. The functions which they have
branches in potential areas.
· Mobilizing rural savings by inculcating saving
habit through designing appropriate saving schemes suitable to the rural
credit adequately in right time to the target group such as small and marginal
farmers, agricultural labourers, artisans and small entrepreneurs etc., who are
the supply, extension and customer services.
· Monitoring the projects financed.
· Recovering loans lent for recycling to the
economic significance programmes of the rural sector.
as agent for marketing mutual fund units.
of Regional Rural Bank
Rural Bank is sponsored by a public sector bank which provides guidance in
several ways, viz. subscription to its share capital, provision of such
managerial and financial assistance as may be mutually agreed upon and help in
the recruitment and training of personnel during the initial period of its
functioning. In addition to this, Central Government may also provide necessary
guidelines for the formulation and implementation of policies in respect of
bird-eye-visualisation of the facts pertaining to organisation of these banks
shows the following segments of organisation: –
India appoints an eligible individual as Chairman for five years and such
individual may be reappointed after the expiry of the term. The Chairman shall
receive such salary and allowances and be governed by such terms and conditions
of service, as may be determined by the Central Government. However, the
Chairman of the Regional Rural Banks have been appointed by the Government of
India on the recommendation of the sponsoring banks. The latter is a recommended
person from among the employees of the bank for this post. The Chairman who is appointed
remains on deputation with the Regional Rural Banks. The full salary of the
Chairman is paid by sponsoring banks.
related to operations of Regional Rural Banks may not be decided by one
individual alone, committee form of organisation has also been preferred. The
Board of Directors may comprise such committees, whether consisting wholly of
directors or wholly of other persons or partly of directors and partly of other
persons, as it may think fit, for such purposes as it may decide. As such,
committees are expected to be formed to deal with certain matters. It shows
that organisation structure of these banks would provide room for technical
hands and subject experts.
Rural Bank is empowered to appoint such number of officers and other employees
as it may consider necessary for the efficient performance of its functions and
may determine the terms and conditions of their appointment and service.
However, sponsoring bank may send such number of officers and employees on deputation
as may be required and desirable but
only when it has been requested by the Regional Rural Bank sponsored by it and
that too only in the first five years of its functioning. The remuneration of
officers and other employees appointed by a Regional Rural Bank shall be such
as may be specified by the Central Government keeping into account and giving
due regard to the salary structure of the employees of the State Government and
the local authorities of comparable level and equal status in the notified area
in which the Regional Rural Bank is to operate.
It is not only
necessary that persons from the locality of Regional Rural Banks are recruited;
there is great need for their proper training also. In order to help the
Regional Rural Banks to have trained staff as early as possible, the Reserve
Bank of India has undertaken the task of providing training to the Chairman and
· Branch Organization
One of the
objectives underlying the Regional Rural banking (RRB) channels is to extend to
remote rural areas particularly to un-banked and under banked centres. One of
the important objectives of Regional Rural Banks is to implement a programme of
expending facilities which would provide full advantage of the organised
banking to the rural customer.