Performance Evaluation of Regional Rural Banks ofWest Bengal in the Post-Reorganization Period- A Study

Abstract

India is an agrarian economy with two-third of its population living in rural areas and most of them dependent on agriculture. Agriculture employs large section of the society which is semi-skilled and semi-literate and most of them are unskilled and illiterate. In India rural people have been exploited in the name of credit facility by informal sector such as moneylenders and indigenous bankers. To protect rural section of society, Regional Rural Banks (RRBs) were established to cater the needs of rural and semi-urban people by granting loans and advances to small and marginal farmers, agricultural labourers and rural artisans. These banks are penetrating every corner of the country and are providing a helping hand for development of the economy. The success of every business depends on its effective and efficient performance. To ensure this the Advisory Committee on Flow of Credit to Agriculture and Related Activities under the Chairmanship of Shri V.S. Vyas, recommended restructuring of Regional Rural Banks (RRBs) in 2004. It was suggested to improve the operational viability, financial soundness and enhancing the economies of scale. Since 2005 the process of amalgamation starts, the number of Regional Rural Banks that stood at 196 became 82 operating all over the country. In January 2013, 25 RRBs have been amalgamated into 10. At present there are 61 RRBs in India. This structural consolidation has resulted in formation of new RRBs which are financially stronger and bigger in size in terms of business volume and outreach which would enable them to take advantage of economies of scale and helps in reducing the operational costs. However, this process also helps the sponsor banks in managing the affairs of RRBs more effectively.