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About A Regional Rural Banks


Union Finance Minister recently emphasised regional rural banks (RRBs) to upgrade their digital capability and increase penetration under Pradhan Mantri Mudra Yojana.


GS II: Indian Economy

Dimensions of the Article:

  1. What are Regional Rural Banks (RRBs)?
  2. Functions of RRBs
  3. Issues Related to RRBs

What are Regional Rural Banks (RRBs)?

Set up on the recommendations of Narasimhan Committee on Financial Inclusion in 1976.

  • Can only operate in the areas specified by GOI.
  • Objective of providing credit to the agricultural and rural regions.
  • Financial strength and expertise of commercial banks and Grassroot problem awareness of cooperative societies.
  • CRR and SLR limits apply
  • CAR — 9%
  • Not allowed to borrow under the MSF window.


  • Union: 50%
  • State: 15%
  • Sponsor bank: 35%.
Functions of RRBs:
  • To provide safety to the savings of customers
  • To create credit and increase the supply of money
  • To encourage public confidence in the financial system
  • To mobilize the savings of public
  • To increase its network so as to reach every segment of the society
  • To provide financial services to all customers irrespective of their level of income
  • To bring in social equity by providing financial services to every stratum of society.

Issues Related to RRBs

  • Regional Rural Banks (RRBs) are operating at a higher cost than scheduled commercial banks, and many of their branches are losing money as a result of a lack of business.
  • They primarily provide government programmes like Direct Benefit Transfer in rural areas. Currently, only 19 RRBs have access to online banking, and only 37 have mobile banking licences.
  • Only RRBs that maintain a minimum statutory capital to risk-weighted assets ratio (CRAR) of more than 10% are permitted under current legislation to offer internet banking.

February 2024