12.12 ndian onom
of India holds more than 50 per cent who previously depended on private
stake in them) they are still known as the money lending, and
nationalised banks. (ii) to mobilise rural savings and channelise
(iii) In 1994 itself the government allowed the them for supporting productive activities
opening of private banks in the country. in the rural areas.
The first private bank of the reform era The GoI, the concerned state government and
was the UTI Bank. Since then a few the sponsoring nationalised bank contribute the
dozens Indian and foreign private banks share capital of the RRBs in the proportion of 50
have been opened in the country. per cent, 15 per cent and 35 per cent, respectively.
Thus, since 1993–94 onwards, we see a The area of operation of the RRB is limited to
reversal of the policies governing banks in the notified few districts in a state.
country. As a general principle, the public sector Following the suggestions of the Kelkar
and the nationalised banks are to be converted Committee, the government stopped opening
into private sector entities. What would be the new RRBs in 1987—by that time their total
minimum government holding in them is still a number stood at 196. Due to excessive leanings
towards social banking and catering to the
matter of debate and yet to be decided.19 The policy
highly economically weaker sections, these banks
of bank consolidation is still being followed by the
started incurring huge losses by early 1980s. For
government, so that these banks could broaden
restructuring and strengthening of the banks,
their capital base and emerge as significant players
the governments set up two committees—the
in the global banking competition.20 Every delay Bhandari Committee (1994–95) and the Basu
in it will hamper their interests, as per the experts. Committee (1995–96). Out of the total, 171
were running in losses in 1998–99 when the
regIonal rural Banks (rrBs) government took some serious decisions:
The Regional Rural Banks (RRBs) were first set up (i) The obligation of concessional loans
on 2 October, 1975 (only 5 in numbers) with the abolished and the RRBs started charging
aim to take banking services to the doorsteps of commercial interest rates on its lendings.
the rural masses specially in the remote areas with (ii) The target clientele (rural masses, weaker
no access to banking services with twin duties to sections) was set free now to lend to any
fulfill body.
(i) to provide credit to the weaker sections of After the above-given policy changes, the
the society at concessional rate of interest RRBs started coming out of the red/losses. The
CFS has recommended to get them merged with
19. As per the Strategic Disinvestment Statement of 1999, their managing nationalised or public sector banks
the government had decided to cut its holding in them and finally make them part of the would-be three-
to 26 percent. The policy was put on hold once the UPA
Government came to power. tier banking structure of India. At present there
20. Y.V. Reddy, Lectures on Economic and Financial are 40 RRBs (after amalgamation) functioning
Sector Reforms in India (New Delhi: Oxford University in India even though the amalgamation and
Press, 2002), pp. 137–57
recapitalisation processes are going on (India 2017).