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Problems of RRBs

30-AUG-2014 16:43

    RRB stands for Regional Rural Banks. Regional Rural Banks are local level banking organizations functioning in different Indian states. They have been formed with a vision to serve principally the rural areas of India with fundamental banking & financial services.

    Some of the problems of RRB’s are:

    1. Organizational Problems

    A commercial bank sponsors each RRB. The concerned State government and Central Government also contribute to its capital. Therefore there is a multi - agency control of RRBs. This has led a lack of uniformity in their performance.

    Additionally, this has led to dearth of support from State governments as well as shortage of proper monitoring by sponsor banks. Subsequently, intrinsic in the concept of RRB is the constriction of limited area of operation & restricted clients, i.e., explicit target groups. Also, there has been lack of appropriate procedures & systems within the institutions of RRBs, which could have minimized or avoided the scope for overdues from the beginning. Moreover, the recruitment process as well as training of staff of RRB hasn’t received sufficient attention.

    2. Problems of Recovery

    For numerous years, the revival position of RRBs was awful & their revival varied between 51% to 61%.

    3. Mounting Losses resulting into Non-viability

    4. Management Problems

    RRBs are level small institutions at district level. The sponsor banks have been deputing only mid - management staff to run them. Such mid - management staff finds it complicated to take self-governing decisions in a new environment.

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    Operations of Commercial Banks

    Read more:RRB , Banks

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