RRB establishment

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• Regional Rural Banks were established under the provisions of an Ordinance passed on 26 September 1975 and the RRB Act. 1976

• These were set up on the recommendations of The Narasimham Working Group during the

tenure of Indira Gandhi's government with a view to include rural areas into economic

mainstream since that time about 70% of the Indian Population was of Rural Orientation.

• The development process of RRBs started on 2 October 1975 with the forming of the first

RRB, the Prathama Bank.

• Also on 2 October 1976 five regional rural banks were set up with a total authorised

capital of Rs. 100 crore ($10 Million) which later augmented to 500 crore ($50 Million).

• The Regional Rural Bank were owned by the Central Government ,the State Government

and the Sponsor Bank(There were five commercial banks, Punjab National Bank, State Bank of

India, Syndicate Bank, United Bank of India and United Commercial Bank, which sponsored the

regional rural banks) who held shares in the ratios as follows Central Government-50%, State

Government-15% and Sponsor Banks- 35%.

• Earlier, Reserve Bank of India had laid down ceilings on the rate of interest to be charged

by these RRBs. However from August 1996 the RRBs have been granted freedom to fix rates of

interest, which is usually in the range of 14-18% for advances.