Significant improvement in Regional Rural Banks (RRB's) Performance

The establishment of the Regional Rural Banks (RRBs) was initiated in 1975 under the provisions of the ordinance promulgated on 26.9.1975 and thereafter Section 3(1) of the RRB Act, 1976.

The issued capital of RRBs is shared by Central Government, sponsor bank and the State Government in the proportion of 50%, 35% and 15% respectively. The area of operation of a majority of the RRBs is limited to a notified area comprising a few districts in a State. As on 31.3.2006, RRBs are operating with a network of 14494 branches covering 525 districts out of 605 districts in the country in 26 States.

In the year 2005, a process was initiated for the structural consolidation of RRBs sponsored by the same bank within a State. As a result of amalgamation, 196 RRBs were reduced to 133 by way of amalgamation as on 31.3.2006 and have been further reduced to 102, as on date. The amalgamated RRBs will reap benefits of staff rationalizaton, increased quantum of advances and investments on the increased capital base and the benefit of larger resources and economies of scale.

RRBs are showing considerable improvement in their performance and their total business has been increased from Rs. 82463.94 crore in the year 2003-04 to Rs. 111041.40 crore in 2005-06. The Agricultural loans has increased from Rs. 7174.97 crore in the year 2003-04 to Rs. 15298.88 crore in the year 2005-06 and has thus more than doubled during the period of 3 years. Gross NPA has also reduced from 12.63% in the year 2003-04 to 7.28% in the year 2005-06, while Net NPA has reduced from 8.55% in the year 2003-04 to 3.92% in the year 2005-06 during this period.

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