TO THE PRESENTATION

ON
RRBs and COMMERCIAL BANKS

BANKING

Crowthers Definition banking Bank is an institution which collects money from those who have in spare and lend this money out to those who require it. All those institutions which are in the business of banking are called financial institutions.

COMMERCIAL BANKS

A commercial bank (or business bank) is a type of financial institution and intermediary.

It is a bank that provides transactional, savings, and money market accounts and that accepts time deposits

Classification of commercial banks

Scheduled banks :- included in the Second Schedule of RBI Act 1934

Non scheduled commercial banks :Banks which are not included in the Second Schedule of RBI Act 1934.

Scheduled banks: 1.Public Sector Banks :- majority of stake

is held by the government. Eg. SBI, PNB, Syndicate Bank,etc. 2.Private Sector Banks :- majority of stake is held by private individuals. Eg. ICICI Bank, IDBI Bank, etc. 3.Foreign Banks :- Head office outside the country in which they are located. Eg. City Bank, Standard Chartered Bank,. etc.

IN INDIA
27 public sector banks 29 private sector banks 36 foreign banks 196 RRBs 4 local area banks

ROLE OF COMMERCIAL BANKS

processing of payments by way of telegraphic transfer, internet banking, or other means issuing bank drafts and bank cheques accepting money on term deposit lending money by overdraft, installment loan, or other means safekeeping of documents and other items in safe deposit boxes cash management and treasury merchant banking and private equity financing

FUNCTIONS
Functions of Commercial Banks 1.Primary functions
a) accepting deposits b) granting loans and advances

2. Secondary functions
a) Issuing credit b) foreign exchange c) Standing guarantee

d. Undertaking safe custody

e .Business information f. Issuing demand drafts g. Transfering money h. Provide credit

Functions of commercial banks 1. Accepting deposits 2. Advancing Loans 3. Discounting Bills of exchange 4. Agency services 5. General services Credit Creation: It is one of the most outstanding function of commercial banks. A bank creates credit on the basis of its primary deposits.

1. Accepting Deposits

i) Demand or Current Account Deposits: A depositor can withdraw it in part or in full ,at any time he likes, without notice It carries no interest

ii) Fixed Deposits : Fixed deposits for 15days to few years, Withdrawn at expiry of term, High rate of interest, A source of investment
iii) Saving Bank Deposits: small saving deposits, salaried people, less rate of interest money can be withdrawn through cheques

2. Advancing Loans

Important means of earnings for the banks ways of advancing loan By allowing an over draft facility

a.

b.

Loans by creating a deposit

3.Discounting Bills Of Exchange

The seller can give handy to a bank ,which will give him cash against it ,Bank charges interest on it

4. Agency Services
Collection of bills, cheques

Collection of dividends, interest, premium Purchase and sale of shares ,etc

5.General services
Travellers cheques Supplying trade information Economic surveys

The Narasimham committee on rural credit recommended the establishment

The government passed the Regional Rural Act, 1976.

Establishment of 19 Regional Rural Banks (RRBs)

Initially, five RRBs were set up and sponsored by Syndicate Bank, State Bank of India, Punjab National Bank, United Commercial Bank and United Bank of India

GOAL : to developing the rural economy development of agriculture

1.
2.

3.

trade, commerce, industry and other activities in the rural areas credit and other facilities particularly to small and marginal farmers, agricultural labourers, artisans and small farmers

Objectives
1. 2. 3.

RRBs established with the explicit objective of Bridging the credit gap in rural areas Check the outflow of rural deposits to urban areas Reduce regional imbalances and increase rural employment generation

Each RRB is sponsored by a public sector bank- provides assistance in several ways

Functions
RRB is required to undertake the business of 1. granting loans and advances to small and marginal farmers and labours 2. granting loans and advances to artisans small entrepreneurs and persons of small means engaged in trade commerce industry or other productive activities forty percent of their advances are accounted for the priority sector- 25% should go to weaker section

Regional Rural Banks in India

30 Regional Rural Banks in India, under SBI in 13 states across 2000 branches 2000 84 REGIONAL RURAL BANKS AS ON JANUARY 1, 2010

Others Haryana State Cooperative Apex Bank Limited National Bank for Agriculture and Rural Development Sindhanur Urban Souharda Co-operative Bank United Bank of India Syndicate Bank

RRBs are jointly owned by GoI, the concerned State Government and Sponsor Banks (27 scheduled commercial banks and one State Cooperative Bank) The issued capital of a RRB is shared by the owners in the proportion of 50%, 15% and 35% respectively. Vyas Committee (2004): RRBs reduced from 196 to 133 as on 31 March, 2006 and to 96 as on 30 April 2007.

Government initiated a process of structural consolidation of RRBs by amalgamating RRBs sponsored by the same bank within a State. The amalgamated RRBs would provide better customer service

Recapitalization of RRBs - 27 RRBs having negative net worth as on 31stMarch, 2007, identified to be recapitalized in a phased manner. The total amount of recapitalization was assessed at Rs. 1,795.97 crore.

District Coverage
RRBs covered 525 out of 605 districts as on 31 March 2006 After amalgamation, RRBs have become quite large covering most parts 40 RRBs covered two districts and 16 RRBs covered a single district each important segment of the Rural Financial Institutions (RFI) for financial inclusion