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).