Regional Rural Banks :

In 1975, a new set of banks called the Regional Rural Banks, were setup based on the recommendations of a working group headed by Shri Narasimham, to serve the rural population by providing banking and credit facility to agriculture and other rural sectors. The development process of RRBs started on 2 October 1975 with the forming of the first RRB, the Prathama Bank. The shares of RRBs owned were held by the Central Government, the State Government and the Sponsor Bank who in the ratios of 3:1:1. Inception of regional rural banks (RRBs) can be seen as an unique experiment as well as experience in improving the efficacy of rural credit delivery mechanism in India. With joint shareholding by Central Government, the concerned State Government and the sponsoring bank, an effort was made to integrate commercial banking within the broad policy thrust towards social banking keeping in view the local peculiarities. RRBs were expected to play a vital role in mobilizing the savings of the small and marginal farmers, artisans, agricultural labourers and small entrepreneurs and inculcate banking habit among the rural people. These institutions were also expected to plug the gap created in extending the credit to rural areas by largely urban-oriented commercial banks and the rural cooperatives, which have close contact with rural areas but fall short in terms of funds.