Regional Rural Banks (RRBs) represent an innovation in Indian Banking. The innovation is unique in terms of its objectives, functions, area of operation and clientele. For this reasons, RRBs can be regarded as specialized Institutions, i.e. distinct from commercial banks as well as Co-operative credit agencies.
The Banking Commission in the year 1972 observed that despite the massive expansion of branch network of commercial Banks in the rural areas, a vast segment of the rural population comprising weaker sections and economically backward classes were deprived of banking facilities as their requirements were small and financing them by commercial banks was perceived to be a non-viable proposition. The Commission felt that an alternative credit delivery mechanism by way of setting up of specialized Banks, particularly to cater to these segments of the population, could be explored by the Government. Based on the recommendations of Narasimhan Committee which gave its report in 1975, the Government of India decided to set up Regional Rural Bank (RRBs). Regional rural Banks Ordinance was promulgated by the President of India on September 26,1975. Accordingly, Five RRBs started functioning from 2nd October 1975. The Ordinance was subsequently replaced by the Regional Rural Bank’s Act, 1976 dated February 9,1976. This Act provide for incorporation, regulation and winding up Regional Rural Banks. This Act contains all provisions for the proper functioning of RRBs and its supervision by NABARD and RBI as a regulator.
“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 Labourers, Artisans and small entrepreneurs and for matters connected therewith and individuals thereto”.
RRBs faced many ups and downs during the last 46 years since its inception because it was a new and unique concept ever implemented in the country. The number of RRBs which increased from 5 to 196 during expansion phase from 1976 to 1986 showed the willingness of Govt. of India and the concerned State Governments looking to its objectives. Various recommendations of Committee pointed out the need of increasing the size of RRBs to make them economical viable. With this view the “merger” of RRBs took place during 2005 onwards. They are successfully competing with their banking counter parts in rural areas with the implementation of computerization and Core Banking solutions (CBS) with the active support of Govt. of India and NABARD.
In view of restructuring of RRBs, the Government of India has taken a decision to amalgamate the RRBs sponsored by the same commercial Bank, which are existing in a particular State. Accordingly, in Karnataka State, our Bank namely Karnataka Vikas Grameena Bank has come in to existence with effect from 12th September 2005 by amalgamating 4 erstwhile RRBs namely Malaprabha, Bijapur, Varada and Netravati Grameena Banks. The bank is operating in almost 1/3rd of the geographical area of Karnataka state consisting of 6 districts of northern Karnataka (Bagalkote, Belagavi, Vijayapura, Dharwad, Gadag,Haveri ) and 3 districts of coastal Karnataka (Uttar Kannada ,Mangaluru and Udupi).
Head quartered in Dharwad, it has ten Regional Offices (Dharwad, Gadag, Haveri, Belagavi, Chikkodi, Gokak, Vijayapura, Bagalkote, Kumta and Mangaluru) situated in the above mentioned nine districts of its jurisdiction. It has a network of 629 branches and a total business of Rs.30748 Crore as on date consisting of Rs.17647 crores Deposits and Advances of Rs.13101 Crores.
It is a scheduled Bank with share capital contributed in the ratio of 50:15:35 by the Central Government, Government of Karnataka and the Canara Bank respectively. The Bank has a net worth of Rs.1224 Crore and is considered as one of the strongest and most vibrant RRBs in the country. The Bank is actively involved in overall development of rural areas since the very beginning. The upliftment of weaker sections and the down trodden has been our major agenda.
KVGB is catering to the financial and banking needs of more than 81 lakh customers spread over in 2033 villages. In addition to the branch network, the bank is serving the villages through 689 Business Correspondents. The Bank has committed and dedicated work force of 3242 staff members, who strive hard to change the lives of the common people along with the responsibility of taking this Bank to greater heights.
The Bank is in the forefront in implementing all the available modern technologies. The Bank is providing services of NEFT/RTGS/ATM facility, Net banking, e-KYC etc., apart from implementing IMPS through mobile banking channel. 74 ATMs, are also functioning along with one mobile ATM to reach out to the remotest villages.
Initially, the authorized share capital of each Rural Bank was Rs. One Crore, divided into 1 lakh shares of Rs. 100/- each. 50 % of the issued capital was subscribed by the Central government, 15% by the Concerned State Government and 35% by the Sponsor Bank. With the enactment of RRBs (Amendment) Act, 1987, the authorized capital of each RRB has been raised to Rs. 5 Crores and paid up Capital to Rs. One Crore. The Board of Directors of Rural Bank may, after consultation with the Reserve Bank and Sponsoring Bank and with the prior approval of Central Government, increase the issued Capital from time to time.
A RRB transacts its business as per the direction of the Board of Directors. The policies of Central Government ,Reserve Bank of India, NABARD and Sponsor Bank are put up before the Board for its approval. Therefore, the general superintendence and management of the affairs and business of a RRB vest in the Board. The Board of directors consists of the Chairman and the following members, namely;
The Central Government may increase the number of members of the Board, but not exceeding fifteen in the aggregate.
The Organizational setup of Karnataka Vikas Grameena Bank comprises of Head Office, Regional / Area Offices and Branches. At present, the Bank has set up 10 Regional Offices covering about 50 to 76 Branches located in a District / contiguous Districts, taking into account the network of Branches, volume of Business, Potentiality and geographical situation so as to have effective supervision and control
The Regional Rural Banks Act, 1976 provides for the incorporation and regulation 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 labourers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto.
According to Section 18 (1) of the Regional Rural Banks Act, 1976 every Regional Rural Bank shall carry on and transact the business of Banking as defined in clause (b) of section 5 of the Banking Regulation Act 1949, and may engage in one or more forms of business specified in sub-section (1) of section 6 of that Act. According to sub-section 2 of Section 18 of Regional Rural Banks Act, the Bank shall in particular, undertake the following types of business:
From the above, it is clear that Regional Rural Bank can carry on and transact the business of Banking as defined in clause (b) of section 5, and sub-section (1) of section 6 of the Banking Regulation Act, 1949, just like any other Commercial Bank.
Section 5 (1) of Banking Regulation Act, 1949 defines banking “Banking means the accepting for the purpose of lending or investment of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft order or otherwise.
Section 6 of the said Act lays down the forms of business in which Banking Companies may engage and within the ambit of the Provisions of that section modern Banks, in addition to their principal functions of –
These subsidiary functions may be broadly classified under two groups: viz.: (1) Agency Services and (2) Miscellaneous or General utility services. Among the agency services rendered, the following are worth noting:
Among the miscellaneous services, the following are the more important ones :
Though the Regional Rural Banks are permitted to transact all the business as stated above, at present, our activities are mainly concentrated in carrying on the principal functions of acceptance of deposits and granting of loans and advances, particularly to the weaker sections of the society especially of the rural areas, as specifically stated under Sub-section 2 of section 18 of the Regional Rural Banks Act’s act stated earlier. In addition to this, some of the subsidiary functions like collection of cheques, drafts, bills, interest and dividend warrants accepting standing instructions, etc., are also carried out by the branches. Further, the business policy of the RRBs are also governed by the guidelines given by the RBI, NABARD, Government of India from time to time. RRBs are now permitted to undertake all type of banking business (except Foreign Exchange Business) as per the Narasimhan Committee recommendations. RRBs are also permitted to finance for Non-Priority Sector to the extent of 40% of Advances and to make 60% of credit deployment to Non Target Group.