Role of Regional Rural Banks in Deepening Financial Inclusion in India

Banking sector plays a key role in the economic development of a country especially a developing country like India. Banks act as lubricants for the entire economy in general and the monetary and financial system in particular. Since a large section of the Indian population lives in rural area, their participation in economic activities is a perquisite for the overall development of the country as a whole. There is a need for robust banking system in rural areas, which not only provides them safe and cost-effective avenue to keep their money but also provides affordable and timely credit for their livelihood activities largely revolving around agriculture and allied sectors. Based on the recommendations given by the Narasimhan committee, the regional rural banks (RRBs) were established as low cost institutions to serve the rural economy by providing credit to farmers particularly to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs for agriculture, and other productive activities in the rural areas. This article tries to understand the importance of banking system in rural areas and the role played by the banking system in supporting sustainable rural livelihoods and prescribe recommendation for the resolution of the issues faced by RRBs.