Performance evaluation of regional rural banks in India

Author K. Sivaiah
DOI

Country : India
Subject : Econometrics

Abstract

Institutional credit system has been playing a vital role in the economic development of rural India particularly at this important juncture when we are entering 21st century. The Government of India accepted the recommendations of the Working Group. Accordingly, Regional Rural Bank Ordinance 1975 was promulgated which was later replaced by the Regional Rural Banks Act. On 2nd October, 1975 five RRBs were established. Main objectives of establishment of RRBs were to boost rural development; to provide credit facilities to small & marginal farmers, landless labourers and rural artisans; to inculcate banking habits in the rural masses; to help small entrepreneurs in the establishment of industries; to eradicate unemployment of rural areas. The Narasimhan committee conceptualized the creation of RRBs in 1975 as a new set of regionally oriented rural banks, which would combine the local feel and familiarity of rural problems characteristic of cooperatives with the professionalism and large resource base of commercial banks. Subsequently, the RRBs were set up through the promulgation of RRB Act of 1976. This paper attempts to analyze the financial performance of RRBs in India during the period 2001–02 to 2013–2014. The study is based on secondary data collected form annual reports of NABARD and RBI. An analytical research design of Key Performance Indicators such as number of bank branches, deposits, loans, investments and growth is taken for the present study. The study is diagnostic and exploratory in nature and makes use of secondary data. The study finds and concludes that performance of RRBs has significantly improved.

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