The Efficacy and Working of Regional Rural Banks: An Implication in Indian Context

In the wake of introduction of financial sector reforms, the feasibility of the Regional Rural Banks (RRBs) emerged as the most crucial factor in deciding the desired role due to their limited business flexibility with hardly any scope of diversification, smaller size of loans with higher exposure to risk prone advances and professional inefficiency in financial deployment. In order to strengthen RRBs and to improve their performance,various initiatives have been taken by the Government of India and theReserve Bank of India. The paper, therefore, is an attempt to analyze the effectiveness of theRRBs in India. The study observed that in deposit mobilization and advances channelization, the RRBs failed to maintain the trends of commercial banks of the country though a number of branches have been opened up over the years to culminate the saving habit. The banks are not in a position to deploy credit for socio-economic development alike commercial banks in India. The credit deposit ratio, however, is comparatively low exhibited poor credit absorption capacity of the along with lack of entrepreneurial zeal to undertake viable projects. The paper validated the fact that the RRBs deploying credit at the same rate what they have mobilized for this purpose although they have not attained the stipulated norms of credit deposit ratio.