Regional Rural Banks (RRBs) were established under the provisions of an Ordinance passed on September 1975 and the RRB Act 1976 on the recommendations of the M. Narasimham Working Group with a view to providing sufficient banking and credit facilities to agriculture and other rural sectors. Thus, RRBs were a low-cost Bank designed to cater to the needs of small and marginal farmers, rural artisans, petty traders etc., who operate in rural areas and bring them into the economic mainstream, as 70% of the Indian population is of rural orientation. The development process of RRBs started on 22nd October 1976 with the formation of the first RRB in the country viz Prathama Bank (sponsored by Syndicate Bank) with an authorized capital of ` 5.00 Crore. The Regional Rural Banks are owned by the Central Govt, State Govt and Sponsor Bank in the ratio of 50:15:35 respectively.
RRBs are recognized by law and they have legal significance. The Regional Rural Banks Act 1976, Act No. 21 of 1976 [9 February 1976] reads : “For the incorporation , regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing , for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural laborers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto”.
In Karnataka state, Syndicate Bank had sponsored four RRBs, namely Malaprabha Grameena Bank, Bijapur Grameena Bank, Varada Grameena Bank and Netravathi Grameena Bank. RRB’s are going through a process of amalgamation and consolidation since 2005. Thus, these four RRBs were amalgamated to form the KARNATAKA VIKAS GRAMEENA BANK by a Government of India Notification dated 12th September 2005. The single entity that so emerged now operates in the nine districts of Bagalkot, Belgaum, Bijapur, Dakshin Kannada, Dharwad, Gadag, Haveri, Udupi and Uttar Kannada catering to the financial needs of the people in these districts.