Role of regional rural and co-operative bank in rural India
Role of regional rural Banks
1) Bridging the credit gaps in rural areas.
2) To develop such measures which could restrict the outflow of rural deposits to urban areas.
3) To reduce regional imbalances and increase rural employment generation activities.
For achieving its objectives the RRBs provide financial assistance to different segments of rural population engaged in rural activities.
Area of Functioning of Regional Rural Banks:
The Regional Rural Banks are required to function within a limited area for which they are established. Usually the functional area of Each RRB is confined to a few districts of the state in which they are set up. The area of functioning of RRBs is decided by central government in consultation with NABARD and the Sponsor Banks by way of a notification issued in this regard.
It is therefore necessary for RRBs to establish their Head Office in central place of their notified area of functioning because they are also authorized to open their branches or appoint agency within their specified areas.
RRB has following major role in implementation of central and state government sponsored various programme of poverty alleviation as-
- Swarnajayanti Gram Swarozgar Yojana(SGSRY)
- Prime minister Rozgar guarantee Yojana
- Old Age pension
- Midday Meal
- Indira Awas Yojana
- Payment to Aganbadi
- Scholarship to Students
- Labor payment for NAREGA laborers
NABARD is the main regulatory authority of all Regional rural Banks in India.
Role of co-operative bank
I. Alternative Credit Source:
The main objective of cooperative credit movement is to provide an effective alternative to the traditional defective credit system of the village money lender. The cooperative banks tend to protect the rural population from the clutches of money lenders. The money lenders have so far dominated the rural areas and have been exploiting the poor people by charging very high rates of interest and manipulating accounts.
II. Cheap Rural Credit:
Cooperative credit system has cheapened the rural credit both directly as well as indirectly:
(a) Directly, because the cooperative societies charge comparatively low interest rates, and
(b) Indirectly, because the presence of cooperative societies as an alternative agency has broken money lender’s monopoly, thereby enforcing him to reduce the rate of interest.
III. Productive Borrowing:
An important benefit of cooperative credit system is to bring a change in the nature of loans. Previously the cultivators used to borrow for consumption and other unproductive purposes. But, now, they mostly borrow for productive purposes. Cooperative societies discourage unproductive borrowing.
IV. Encouragement to Saving and Investment:
Cooperative credit movement has encouraged saving and investment by developing the habits of thrift among the agriculturists. Instead of hoarding money the rural people tend to deposit their savings in the cooperative or other banking institutions.
V. Improvement in Farming Methods:
Cooperative societies have also greatly helped in the introduction of better agricultural methods. Cooperative credit is available for purchasing improved seeds, chemical fertilizers, modern implements, etc. The marketing and processing societies have helped the members to purchase their inputs cheaply and sell their produce at good prices.
VI. Role of Cooperative Banks before 1969:
Till the nationalisation of major commercial banks in 1969, cooperative societies were practically the only institutional sources of rural credit. Commercial banks and other financial institutions hardly provided any credit for agricultural and other rural activities. Cooperative credit to the agriculturists as a percentage of total agricultural credit increased from 3.1 per cent in 1951-52 to 15.5 per cent in 1961-62 and further to 22.7 per cent in 1970-71.
On the other hand, the agricultural credit provided by the commercial banks as a percentage of total agricultural credit remained almost negligible and fell from 0.9 percent in 1951-52 to 0.6 percent in 1961-62 and then rose to 4 per cent in 1970-71.
VII. Role of Cooperative Banks after 1969:
After the nationalisation of commercial banks in 1969, the government has adopted a multi-agency approach. Under this approach, both cooperative banks and commercial banks (including regional rural banks) are being developed to finance the rural sector.
But, this new approach also recognised the prime role to be played by the cooperative credit institutions in financing rural areas because of the following reasons:
(a) Co-operative credit societies are best suited to the socio-economic conditions of the Indian villages.
(b) A vast network of the cooperative credit societies has been built over the years throughout the length and breadth of the country. This network can neither be duplicated nor be surpassed easily.
(c) The cooperative institutions have developed intimate knowledge of the local conditions and problems of rural areas.
VIII. Suitable Federal Structure of Cooperative Banking System:
Cooperative banking system has a federal structure with- (a) primary agricultural credit societies at the village level, (b) higher financing agencies in the form of central cooperative and state cooperative banks, (c) land development banks for providing long- term credit for agriculture. Such a banking structure is essential and particularly suited for effectively meeting the financial requirements of the vast rural areas of the country.
Considering the great importance of cooperative banks, particularly in the rural areas, it is not surprising that every committee or commission, that has examined the working of the cooperative banking system in India, has expressed the common view that “cooperation remains the best hope of rural India.”