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Regional rural bank

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Rural banking in India started since the establishment of banking sector in India. Rural Banks in those days mainly focussed upon the agro sector.Banking Regulation Act,1949 brought cooperative banks and regional rural banks under the Reserve Bank’s jurisdiction, while amendments to the Reserve Bank of India Act. Regional Rural Banks (RRB)are Regulated by the Rural Planning and Credit Department of Government of India and supervised by NABARD. Regional rural banks in India penetrated every corner of the country and extended a helping hand in the growth process of the country.The Government of India set up Regional Rural Banks (RRBs) on October 2, 1975. The banks provide credit to the weaker sections of the rural areas, particularly the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs. Initially, five RRBs were set up on October 2, 1975 which were sponsored by Syndicate Bank, State Bank of India, Punjab National Bank, United Commercial Bank and United Bank of India. Capital share being 50% by the central government, 15% by the state government and 35% by the scheduled bank. The total authorized capital was fixed at ₹ 1 crore which has since been raised to ₹ 5 Crore. Till date in rural banking in India, there are 14,475 rural banks in the country of which 2126 (91%) are located in remote rural areas.


Reform Process of Regional Rural Banks


RRBs started their development process with the formation of a single bank (Prathama Grameen Bank) on 2nd October 1975. There were 133 RRBs (post-merger) covering 525 districts with a network of 14,494 branches till 31 March 2006. RRBs were originally conceived as low cost institutions having a rural ethos, local feel and pro poor focus. However, within a very short time, most banks were making losses. The original assumptions as to the low cost nature of these institutions were belied. When the reform process in the banking sector was initiated, RRBs were taken up for a close look. The GoI in consultation with RBI and NABARD started the reform process through a comprehensive package for RRBs including cleansing their balance sheets and recapitalising them. Extant lending restrictions were removed and space and variety available for investment of their surplus funds was expanded.Simultaneously, a number of human resource development and Organisational Development Initiatives (ODI) were taken up by NABARD with funding support of the Swiss Development Corporation (SDC) and with the tools of training and exposure visits, ODI, technology support, computerization and use of IT, system development, etc. for business development and productivity improvement. By end March 2005, there was a remarkable improvement in the financial performance of RRBs as compared to the position prevailing in 1994-95. The number of banks reporting profits went up to 166 of the 196 RRBs. As on 31 March 2006, of the total 133 RRBs (post merger), 111 posted profits and 75 of these RRBs were sustainably viable organisations having no accumulated losses as also posting current profits. GoI initiated the process of structural consolidation of RRBs by amalgamating RRBs sponsored by the same bank within a State as per the recommendations of the Vyas Committee (2004). The amalgamated RRBs were expected to provide better customer service due to better infrastructure, computerization of branches, pooling of experienced work force, common publicity / marketing efforts, etc. and also derive the benefits of a large area of operation, enhanced credit exposure limits and more diverse banking activities. As a result of the amalgamation, the number of RRBs was reduced from 196 to 133 as on 31 March, 2006 and to 96 as on 30 April 2007. Thus under the amalgamation process, 145 RRBs have been amalgamated to form 45 new RRBs.

There are several concessions enjoyed by the RRBs by Reserve Bank of India such as lower interest rates and refinancing facilities from NABARD like lower cash ratio,lower statutory liquidity ratio, lower rate of interest on loans taken from sponsoring banks, managerial and staff assistance from the sponsoring bank and reimbursement of the expenses on staff training. The RRBs are under the control of NABARD. NABARD has the responsibility of laying down the policies for the RRBs, to oversee their operations, provide refinance facilities, to monitor their performance and to attend their problems.Earlier Reserve Bank of India had laid down ceilings on the rate of interest to be charged by these RRBs. However from August 1996 the RRBs have been granted freedom to fix rates of interest, which is usually in the range of 14-18% for advances.

RRB's Potential Role in Financial Inclusion

Post-merger RRBs represent a powerful instrument for financial inclusion. Their outreach vis-à-vis other scheduled commercial banks particularly in regions and across population groups facing the brunt of financial exclusion is impressive, as observed from an analysis of Basic Statistical Returns of the RBI and indicated in the following paragraphs. With merger infusing the much needed financial strength in RRBs coupled with the local feel and familiarity they command, RRBs are in a unique position to play a decisive role in financial inclusion.

Self Help Groups - Bank Linkage

The microfinance services provided through SHG - bank linkage has so far been the most successful initiative in financial inclusion. Therefore, an analysis of RRB’s involvement in the SHG movement will be an important indicator of the kind of mandate which RRBs could be given for further widening and deepening of financial inclusion.

RRBs as Self Help Promotion Institutions (SHPI)

RRBs have not only provided financial services to the SHG-Bank Linkage Programme, but have also played a significant role as SHPIs. As many as 104 RRBs (31 March 2006) are also functioning as SHPIs with grant assistance from NABARD. Non-availability of good NGOs is a matter of concern especially in North-Eastern, Central and Eastern Regions. RRBs can play a vital role as SHPIs in such areas. The foregoing paragraphs conclusively indicate that RRBs are well positioned to play a major role in financial inclusion particularly in areas / regions with high rates of financial exclusion. RRBs were originally created to cater to neglected sections / areas as they were expected to have sound financial management combined with local feel and familiarity. With the amalgamation of RRBs, they have acquired the critical mass in terms of financial strength to widen and deepen their outreach. With the requisite strength having been developed, RRBs are the best suited vehicles to widen and deepen the process of financial inclusion. However, utmost care must be taken to ensure that in the process of fulfilling the socio-economic objective of financial inclusion, RRBs' do not again fall into the vicious circle of deteriorating financial performance and deviation from their mandate. RRBs may be provided adequate promotional and developmental assistance to contribute substantially to financial inclusion in a way that the business generated out of inclusion efforts add positively to their performance.


REGIONAL RURAL BANKS ACT 1976 THE REGIONAL RURAL BANKS ACT, 1976 ACT NO. 21 OF 1976 [9th February, 1976.] An Act to provide for the incorporation, regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto. CHAP PRELIMINARY CHAPTER I PRELIMINARY Short title, extent and commencement. 1. Short title, extent and commencement.- (1) This Act may be called the Regional Rural Banks Act, 1976. (2) It extends to the whole of India. (3) It shall be deemed to have come into force on the 26th day of September, 1975. Definitions. 2. Definitions.- In this Act, unless the context otherwise requires,-- (a) "Board", in relation to a Regional Rural Bank, means the Board of directors of that Regional Rural Bank; (b) "Chairman", in relation to a Regional Rural Bank, means the individual appointed or re-appointed under sub- section (1) of section 11 as the Chairman of that bank; (c) "director", in relation to a Regional Rural Bank, means a member of the Board of that bank; 1*[(ca) "National Bank" means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);] (d) "notified area" means the local limits, specified under sub-section (1) of section 3, within which a Regional Rural Bank shall operate; ----------------------------------------

1. Ins. by Act 1 of 1988, s. 2 (w.e.f. 28-9-1988). 264 (e) "prescribed" means

prescribed by rules made under this Act; (f) "Regional Rural Bank" means a Regional Rural Bank established under sub-section (1) of section 3; (g) "Sponsor Bank", in relation to a Regional Rural Bank, means a bank by which such Regional Rural Bank has been sponsored; (h) "State Government" means,-- (i) in relation to a Regional Rural Bank established in a Union territory, the Central Government; (ii) in relation to a Regional Rural Bank established in a State, the Government of that State; (i) words and expressions used herein and not defined but defined in the Reserve Bank of India Act, 1934 (2 of 1934), shall have the meanings respectively assigned to them in that Act; (j) words and expressions used herein and not defined either in this Act or in the Reserve Bank of India Act, 1934 (2 of 1934), but defined in the Banking Regulation Act, 1949 (10 of 1949), shall have the meanings respectively assigned to them in the Banking Regulation Act, 1949. CHAP INCORPORATION AND CAPITAL OF REGIONAL RURAL BANKS CHAPTER II INCORPORATION AND CAPITAL OF REGIONAL RURAL BANKS Establishment and incorporation of Regional Rural Banks. 3. Establishment and incorporation of Regional Rural Banks.- (1) The Central Government may, if requested so to do by a Sponsor Bank, by notification in the Official Gazette, establish in a State or Union territory, one or more Regional Rural Banks with such name as may be specified in the notification and may, by the said or subsequent notification, specify the local limits within which each Regional Rural Bank shall operate. (2) Every Regional Rural Bank shall be a body corporate with perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and to contract and may sue and be sued in its name. 1*[(3) It shall be the duty of the Sponsor Bank to aid and assist the Regional Rural Bank, sponsored by it, by-- (a) subscribing to the share capital of such Regional Rural Bank; (b) training personnel of such Regional Rural Bank; and (c) providing such managerial and financial assistance to such Regional Rural Bank during the first five years of its functioning, as may be mutually agreed upon between the Sponsor Bank and the Regional Rural Bank: Provided that the Central Government may, either on its own motion or on the recommendation of the National Bank, extend the said period of five years by such further period, not exceeding five years at a time, subject to such conditions as it may deem fit to impose."] ------------------------

1. Subs. by Act 1 of 1988, s. 3, for sub-section (3) (w.e.f. 28-9-1988). 265 Offices and agencies. 4. Offices and agencies.-(1) A Regional Rural Bank shall have its head office at such place in the notified area as the Central Government may, after consultation with the 1*[National Bank] and the Sponsor Bank, specify by notification in the Official Gazette. (2) A Regional Rural Bank may, if it is of opinion that it is necessary so to do, establish its branches or agencies at any place in the notified area. Authorised capita. 5. Authorised capital.- The authorised capital of each Regional Rural Bank shall be 2*[five crores of rupees dividend into five lakhs] of fully paid-up shares of one hundred rupees each: Provided that the Central Government may, after consultation with the [National Bank] 2* and the Sponsor Bank, increase or reduce such authorised capital; so, however, that the authorised capital shall not be reduced below twentyfive lakhs of rupees, and the shares shall be, in all cases, fully paid-up shares of one hundred rupees each. Issued capital. 6. Issued capital.- 4*[(1) The issued capital of each Regional Rural Bank shall, in the first instance, be such as may be fixed by the Central Government in this behalf, but it shall in no case be less than twenty-five lakhs of rupees or exceed one crore of rupees.] (2) Of the capital issued by a Regional Rural Bank under sub- section (1), fifty per cent. shall be subscribed by the Central Government; fifteen per cent. by the concerned State Government and thirty-five per cent. by the Sponsor Bank. (3) The Board may, after consultation with the 5*[National Bank] concerned State Government and the Sponsor Bank and with the prior approval of the Central Government, from time to time, increase the issued capital of the Regional Rural Bank; and, where additional capital is issued, such capital shall also be subscribed in the same proportion as is specified in sub-section (2). Shares to be approved securities. 7. Shares to be approved securities.- Notwithstanding anything contained in the Acts hereinafter mentioned in this section, the shares of a Regional Rural Bank shall be deemed to be included among the securities enumerated in section 20 of the Indian Trusts Act, 1882 (2 of 1882), and shall also be deemed ---------------------------------------------------------------------- 1. Subs. by Act 1 of 1988 s. 4, for "Reserve Bank" (w.e.f. 28-9-1988). 2. Subs. by s. 5, ibid., for certain words (w.e.f. 28-9-1988). 3. Subs. by s. 5, ibid., for Reserve Bank" (w.e.f. 28-9-1988). 4. Subs. by s. 6, ibid., for sub-section (i) (w.e.f. 28-9-1988). 5. Subs. by s. 6, ibid., for "Reseve Bank" (w.e.f. 12-9-1988). 266 to be approved securities for the purposes of the Banking Regulation Act, 1949 (10 of 1949). CHAP MANAGEMENT CHAPTER III MANAGEMENT Management. 8. Management.- (1) Subject to the provisions of this Act, the general superintendence, direction and management of the affairs and business of a Regional Rural Bank shall vest in a Board of directors who may exercise all the powers and discharge all the functions which may be exercised or discharged by the Regional Rural Bank. (2) In discharging its functions, the Board shall act on business principles and shall have due regard to public interest. Board of directors. 9. Board of directors.- (1) The Board of directors shall consist of the Chairman appointed under sub-section (1) of section 11, and the following other members, namely:-- 1*[(a) two directors, who are not officers of the Central Government, State Government, Reserve Bank, National Bank, Sponsor Bank or any other bank, to be nominated by the Central Government; (b) one director, who is an officer of the Reserve Bank, to be nominated by that Bank; (c) one director, who is an officer of the National Bank, to be nominated by that Bank; (d) two directors, who are officers of the Sponsor Bank, to be nominated by that Bank; and (e) two directors, who are officers of the concerned State Government, to be nominated by that Government.] (2) The Central Government may increase the number of members of the Board; so, however, that the number of directors does not exceed fifteen in the aggregate and also prescribe the manner in which the additional number may be filled in. Term of office of director. 10. Term of office of director.- A director (other than the Chairman) shall hold office for such period not exceeding two years, from the date when he assumes office, as the authority nominating him may specify at the time when the nomination is made, and may, on the expiry of the said period, continue to hold office until his successor has been nominated and shall also be eligible for re-nomination. Chairman. 11. Chairman. (1) The 2*[Sponsor Bank] shall appoint an individual to be the Chairman of a Regional Rural Bank and specify the period, not exceeding five years, for which such individual shall, subject to the provisions of sub-section (4) hold office as the Chairman: 3*[Provided that no appointment of such an individual shall be made,-- (a) if such individual is an officer of the Sponsor Bank, except after consulation with the National Bank; (b) in any other case, except with the prior approval of the Central Grovernment]. ---------------------------------------------------------------------- 1. Subs. by Act 1 of 1988, s. 7, for cls. (a), (b) and (1) (w.e.f. 28-9-1988). 2. Subs. by ins by s. 8, ibid., for "Reserve Bank" (w.e.f. 28-9-1988). 3. Ins. by s. 8, ibid. (w.e.f. 28-9-1988). 267 1*[(1A) Notwithstanding anything contained in sub-section (1),-- (a) the Sponsor Bank shall have the right to terminate the term of office of the Chairman at any time before the expiry of the period specified in sub-section (1): Provided that no such termination shall be made,-- (a) if the Chairman is an officer of the Sponsor Bank, except after consultation with the National Bank; and (b) in any other case, except with the prior approval of the Central Government: Provided further that where the Chairman is not an officer of the Central Government, State Government, Reserve Bank, National Bank, Sponsor Bank or any other bank, he shall be given notice of not less than three months in writing or three months' salary and allowances in lieu of such notice; and (b) the Chairman shall have the right to resign his office at any time before the expiry of the period specified in sub- section (1) by giving to the Sponsor Bank, notice of not less than three months in writing.] (2) The individual, appointed as a Chairman under sub-section (1), shall, on the expiry of the period specified under that sub- section, be eligible for re-appointment. (3) The Chairman shall devote his whole time to the affairs of the Regional Rural Bank and shall have, subject to the superintendence, control and direction of the Board, the management of the whole of the affairs of the Regional Rural Bank. 2*[(4) 3*[The Sponsor Bank] may, at any time, remove the Chairman from office: 4*[Provided that no such removal shall be made,-- (a) if the Chairman is an officer of the Sponsor Bank, except after consultation with the National Bank; and (b) in any other case, except with the prior approval of the Central Government: Provided further that] no person shall be removed from his office, under this sub-section, unless he has been given an opportunity of showing cause against his removal.] (5) The Chairman shall receive such salary and allowances and be governed by such terms and conditions of service as may be determined by the 3*[the Sponsor Bank in consultation with the National Bank]. (6) If the Chairman is, by infirmity or otherwise, rendered incapable of carrying out his duties or is absent, on leave or otherwise, in circumstances not involving the vacation of office, the Central Government may appoint another individual to act as the Chairman during the absence of the first-mentioned Chairman. Disqualifications. 12. Disqualifications.- A person shall be disqualified for being appointed or, as the case may be, nominated as, and for being, a director, if he-- (a) is, or, at any time has been, adjudged insolvent or has suspended payment of his debt or has compounded with his creditors, or (b) is of unsound mind and stands so declared by a competent court, or ---------------------------------------------------------------------- 1. Subs. by Act 1 of 1988 s. 8 (w.e.f. 28-9-1988). 2. Subs. by Act 73 of 1976 s. 6, ibid., for sub-section (4) (w.e.f. 11-6-1976). 3. Subs. by Act 1 of 1988, s. 8, for "the Central Government" (w.e.f. 28-9-1988) 4. Subs. by s. 8, ibid., for "provided that" (w.e.f. 8-9-1988). 268 (c) is or has been, convicted of an offence which, in the opinion of the Central Government, involves moral turpitude. Vacation of the seat of directors. 13. Vacation of the seat of directors.- (1) If a director-- (a) becomes subject to any disqualification specified in section 12, or (b) is absent without leave of the Board for more than three consecutive meetings thereof, his seat shall thereupon become vacant. 1*[(2) A director may resign his office by giving notice thereof in writing to the authority by which he was nominated; and, on such resignation being accepted, the director shall be deemed to have vacated his office.] Meetings of Board. 14. Meetings of Board.- (1) The Board of directors of a Regional Rural Bank shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed. (2) The Chairman of the Regional Rural Bank shall preside over every meeting of the Board, and, in his absence, such director as the Chairman may generally, or in relation to any particular meeting, authorise in this behalf shall preside; and, in the absence of both the Chairman and the director so authorised, the directors present at the meeting shall elect one from among themselves to preside over the meeting. Explanation.--For the purposes of this sub-section, "absence" from a meeting means non-attendance for any reason whatsoever at the meeting, or any part of the meeting during which any business is transacted. (3) All questions at a meeting of the Board shall be decided by a majority of the votes of the directors present and voting; and, in case of equality of votes, the person presiding shall have a second or casting vote. (4) No director shall, as a director, take part in the discussion of, or vote on, any contract, loan, arrangement or proposal, entered into or to be entered into, by or on behalf of the Regional Rural Bank. ------------------------

1. Subs. by Act 1 of 1988, s. 9, for sub-section (2) (w.e.f. 28-9-1988). 269 if he is, in any way, whether directly

or indirectly, interested in the contract, loan, arrangement or proposal and, where a director is interested in any such matter, he shall, at the earliest possible opportunity, disclose to the Board the nature of his interest in such contract, loan, arrangement or proposal, and where he does so, his presence at the meeting shall not count for the purpose of forming any quorum at the time of any such discussion or vote, and if he does vote, his vote shall be void: Provided that nothing contained in this sub-section shall apply to such director by reason only of his being-- (i) a shareholder (other than a director) holding not more than two per cent of the paid-up capital in any public company within the meaning of the Companies Act, 1956 (1 of 1956), or any corporation established by or under any law for the time being in force in India or any co-operative society, with which the Regional Rural Bank has entered into, or proposes to enter into, any contract, loan, arrangement or proposal; or (ii) a director of the Regional Rural Bank as such. Committees of Board. 15. Committees of Board.- The Board may constitute such committees, whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons, as it may think fit, for such purposes as it may decide. Fees and allowances of directors and members of committees. 16. Fees and allowances of directors and members of committees.- (1) Every director and every member of a committee (other than the Chairman) shall be paid such fees and allowances as may be determined by the Central Government: Provided that no fees shall be paid to any director, or member of a committee, if he is an officer of the Central Government, State Government, the Reserve Bank, 1*[National Bank] Sponsor Bank or any other bank. (2) The allowances payable to a director or a member of a committee, who is an officer of the Central Government State Government, Reserve Bank 1*[National Bank] Sponsor Bank or any other bank, shall be paid by the Government or bank by which such officer is employed; and the allowances and fees payable to any other director or member of a committee shall be payable by the concerned Regional Rural Bank. --------

1. Ins. by Act 1 of 1988, s. 10 (w.e.f. 28-9-1988). 270

Staff of Regional Rural Banks. 17. Staff of Regional Rural banks.- (1) A Regional Rural Bank may appoint such number of officers and other employees as it may consider necessary or desirable 1*[in such manner as may be prescribed] for the efficient performance of its functions and may determine the terms and conditions of their appointment and service: Provided that it shall be lawful for a Sponsor Bank, if requested so to do by a Regional Rural Bank sponsored by it, to send, 1***) such number of officers or other employees on deputation to the Regional Rural Bank as may be necessary or desirable for the efficient performance of its functions: Provided further that the remuneration of officers and other employees appointed by a Regional Rural Bank shall be such as may be determined by the Central Government, and, in determining such remuneration, the Central Government shall have due regard to the salary structure of the employees of the State Government and the local authorities of comparable level and status in the notified area. (2) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being in force, no award, judgment, decree, decision or order of any industrial tribunal, court or other authority, made before the commencement of this Act, shall apply to the terms and conditions in relation to the persons appointed by a Regional Rural Bank. (3) The officers and other employees of a Regional Rural Bank shall exercise such powers and perform such duties as may be entrusted or delegated to them by the Board. CHAP BUSINESS OF A REGIONAL RURAL BANK CHAPTER IV BUSINESS OF A REGIONAL RURAL BANK Business which a Regional Rural Bank may transact. 18. Business which a Regional Rural Bank may transact.-(1) Every Regional Rural Bank shall carry on and transact the business of banking as defined in clause (b) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), and may engage in one or more forms of business specified in sub-section (1) of section 6 of that Act. (2) Without prejudice to the generality of the provisions of sub- section (1), every Regional Rural Bank may, in particular, undertake the following types of business, namely:-- (a) the granting of loans and advances, particularly to small and marginal farmers and agricultural labourers,

1. Ins. by Act 1 of 1988, s. 11 (w.e.f. 28-9-1988).

2. Certain words omitted by s. 11, ibid. (w.e.f. 28-9-1988). 271 whether individually or in groups, and to cooperative societies, including agricultural marketing societies, agricultural processing societies, co-operative farming societies, primary agricultural credit societies or farmers' service societies, for agricultural purposes or agricultural operations or for other purposes connected therewith; (b) the granting of loans and advances, particularly to artisans, small entrepreneurs and persons of small means engaged in trade, commerce or industry or other productive activities, within the notified area in relation to the Regional Rural Bank. CHAP ACCOUNTS AND AUDIT CHAPTER V ACCOUNTS AND AUDIT Closure of accounts. 19. Closure of accounts.- (1) Every Regional Rural Bank shall cause its books to be closed and balanced as on the 31st day of December 1*[or such other date in each year as the Central Government may, by notification in the Official Gazette, specify] shall appoint with the approval of the Central Government auditors for the audit of its accounts : 2*[Provided that with a view to facilitating the transition from one period of accounting to another period of accounting under this sub-section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for the closing and balancing of, or for other matters relating to, the books in respect of the concerned years.] (2) Every auditor of a Regional Rural Bank shall be a person who is qualified to act as an auditor of a company under section 226 of the Companies Act, 1956 (1 of 1956), and shall receive such remuneration as the Regional Rural Bank may fix with the approval of the Central Government. (3) Every auditor shall be supplied with a copy of the annual balance-sheet and profit and loss account of the Regional Rural Bank, and a list of all books kept by the Regional Rural Bank, and it shall be the duty of the auditor to examine the balance-sheet and vouchers relating thereto, and, in the performance of his duties, the auditor-- (a) shall have, at all reasonable times, access to the books, accounts and other documents of the Regional Rural Bank; (b) may, at the expense of the Regional Rural Bank, employ accountants or other persons to assist him in investigating such accounts; and (c) may, in relation to such accounts, examine the Chairman or any officer or employee of the Regional Rural Bank. ---------------------------------------------------

1. Subs. by Act 86 of 1988, s. 33 (w.e.f. 30-12-1988). 2. Ins. by s. 33, ibid. (w.e.f. 30-12-

1985). 272 (4) Every auditor of a Regional Rural Bank shall make a report to that bank upon the annual balance-sheet and accounts and in every such report shall state,-- (a) whether, in his opinion, the balance-sheet is a full and fair balance-sheet containing all necessary particulars and is properly drawn up so as to exhibit a true and fair view of the affairs of the Regional Rural Bank, and, in case he had called for any explanation or information, whether it has been given and whether it is satisfactory; (b) whether or not, the transactions of the Regional Rural Bank, which have come to his notice, have been within the powers of that bank; (c) whether or not, the returns received from the offices and branches of the Regional Rural Bank have been found adequate for the purpose of his audit; (d) whether the profit and loss account shows a true balance of profit or loss for the period covered by such accounts; and (e) any other matter which he considers should be brought to the notice of the Regional Rural Bank. Annual report to be furnished to the share holders. 20. Annual report to be furnished to the share holders.- 1*[(1)] Every Regional Rural Bank shall, within 2*[three months from the date of the closure of its accounting year, or such further period, not exceeding three months, as may be permitted by the Reserve Bank], send to each of its shareholders a report as to its working and activities during the accounting year immediately preceding together with a copy of its balancesheet, profit and loss account and the auditor's report in relation to the accounts of the said accounting year. 3*[(2) The Central Government shall cause every auditor's report and report on the working and activities of each Regional Rural Bank to be laid, as soon as may be after they are received, before each House of Parliament.] Disposal of profits. 21. Disposal of profits.- After making provisions for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and all other matters for which provision is, under law, necessary or which are usually provided for by banking companies, a Regional Rural Bank may, out of its net profits, declare a dividend. Regional Rural Bank to be deemed to be a co-operative society forpurpose of the Income-tax Act, 1961. 22. Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961.- For the purpose of the Income-tax Act, 1961 (43 of 1961.), or any other enactment for the time being in force relating to any tax on income, profits or gains, a Regional Rural Bank shall be deemed to be a cooperative society. ---------------------------------------------------------------------- 1. S. 20 renumbered as sub-section (1) thereof by Act 81 of 1985, s. 11 (w.e.f. 1-5-1986). 2. Subs. by Act 1 of 1988, s. 12, for certain words (w.e.f. 28-9-1988). 3. Ins. by Act 81 of 1985, s. 11 (w.e.f. 1-5-1986). 273 Interest-tax not payable. 23. Interest-tax not payable.- Notwithstanding anything contained in the Interest-tax Act, 1974 (45 of 1974), no Regional Rural Bank shall be liable to pay any tax under that Act. CHAP AMALGAMATION OF REGIONAL RURAL BANKS 1*[CHAPTER VA AMALGAMATION OF REGIONAL RURAL BANKS 23A. Amalgamation of Regional Rural Banks. 23A. Amalgamation of Regional Rural Banks.- (1) Notwithstanding anything contained in this Act, if the Central Government, after consultation with the National Bank, the concerned State Government and the Sponsor Bank, is of the opinion that it is necessary in the public interest or in the interest of the development of the area served by any Regional Rural Bank or in the interest of the Regional Rural Banks themselves, that two or more Regional Rural Banks should be amalgamated, that Government may, by notification in the Official Gazette, provide for the amalgamation of such Regional Rural Banks (hereafter in this Chapter referred to as the transferor Regional Rural banks) into a single Regional Rural Bank (hereafter in this Chapter referred to as the transferee Regional Rural Bank) with such constitution, property, powers, rights, interests, authorities and privileges; and with such liabilities, duties and obligations, as may be specified in the notification. (2) Every notification issued under sub-section (1) shall indicate the date with effect from which the amalgamation shall become effective. (3) Every notification issued under sub-section (1) may also provide for all or any of the following matters, namely:-- (a) the continuance in service of all the employees of the transferor Regional Rural Banks (excepting such of them as not being workmen with in the meaning of the Industrial Disputes Act, 1947 (14 of 1947) are specifically mentioned in the notification) in the transferee Regional Rural Bank at the same remuneration and on the same terms and conditions of service, which they were getting or, as the case may be, by which they were being governed, immediately before the date on which the amalgamation takes effect; (b) notwithstanding anything contained in clause (a), where any of the employees of the transferor Regional Rural Banks, not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947) are specifically mentioned in the notification, or where any employee of the transferor Regional Rural Banks has by notice in writing given to the transferee Regional Rural Bank at any time before the expiry of a period of three months next following the date on which the amalgamation takes effect, intimated his intention of not becoming an employee of the transferee Regional Rural Bank, the payment to such employee of compensation, if any, to which he is entitled under the Industrial Disputes Act, 1947, and such gratuity, provident fund and other retirement benefits ordinarily admissible to him under the rules or authorisations of the concerned transferor Regional Rural Banks immediately before that date; (c) the other terms and conditions for the amalgamation of Regional Rural Banks; and (d) the continuance by or against the transferee Regional Rural Bank of any pending legal proceeding by or against any transferor Regional Rural Banks and such consequential, incidental and supplemental provisions, as may, in the opinion of the Central Government, be necessary to give effect to the amalgamation. (4) Every notification issued under sub-section (1) shall, as soon as may be after it has been made, be laid before each House of Parliament. 23B. Notification under section 23A to be sufficient notice to concernedparties. 23B. Notification under section 23A to be sufficient notice to concerned parties.- (1) A notification issued under sub-section (1) of section 23A, shall constitute sufficient notice of the provisions thereof to all the parties concerned and shall be binding on the transferor Regional Rural Banks and the transferee Regional Rural Bank and to the depositors, creditors, employees and all other persons having dealings with such banks. (2) Notwithstanding anything contained in the Transfer of Property Act, 1882 (4 of 1882) or the Registration Act, 1908 (16 of 1908), any notification issued under sub-section (1) of section 23A shall be sufficient conveyance, in accordance with the provisions of the notification, of the business, properties, assets and liabilities, rights, interests, powers, privileges, benefits and obligations of whatever nature of the transferor Regional Rural Banks to the transferee Regional Rural Bank. (3) On and from the date on which the amalgamation takes effect under section 23A, any reference to the transferor Regional Rural Banks in any agreement, conveyance, assurance, power of attorney or any other document of whatsoever nature, shall be deemed to be reference to the transferee Regional Rural Bank and the rights and obligations of the transferor Regional Rural Banks shall be deemed to be the rights and obligations of the transferee Regional Rural Bank to the extent specified in the said amalgamation. 23C. Cessation of business of transferor Regional Rural Banks. 23C. Cessation of business of transferor Regional Rural Banks.- On and from the date on which the amalgamation takes effect under section 23A, the transferor Regional Rural Banks shall cease to carry on business, including that of making of any payment to any depositors or discharge any liability or obligation to the creditors except to the extent as may be necessary for the implementation of the provisions of the said amalgamation. 23D. Liquidation of Regional Rural Banks. 23D. Liquidation of Regional Rural Banks.- Where a notification is issued for the amalgamation of Regional Rural Banks under sub-section (1) of section 23A, the Central Government may, by a further notification in the Official Gazette, direct that on such date, as may be specified therein, the transferor Regional Rural Banks, which by reason of amalgamation will cease to function, shall stand dissolved and such direction shall take effect notwithstanding anything to the contrary contained in section 26.] CHAP MISCELLANEOUS CHAPTER VI MISCELLANEOUS Power of Central Government to give directions. 24. Power of Central Government to give directions.- (1) A Regional Rural Bank shall, in the discharge of its functions, be guided by such directions in regard to matters of policy involving public interest as the Central Government may, after consultation with the Reserve Bank, give. (2) If any question arises as to whether any such direction relates to a matter of policy involving public interest, the decision of the Central Government thereon shall be final. 24A. Inspection, audit and scrutiny by the Sponsor Bank. 2*["24A. Inspection, audit and scrutiny by the Sponsor Bank.- Notwithstanding anything contained in section 19 and without prejudice to the provisions of section 35 of the Banking Regulation Act, 1949, the Sponsor Bank shall, from time to time, monitor the progress of the Regional Rural Banks sponsored by it and cause inspection, internal audit and scrutiny to be made by one or more of its officers and suggest corrective measures to be taken by such Regional Rural Bank.] Obligations as to fidelity and secrecy. 25. Obligations as to fidelity and secrecy.-(1) A Regional Rural Bank shall observe, except as otherwise required by law, the practices and usages customary among bankers and, in particular, it shall not divulge any information relating to, or to the affairs of, its constituents except in circumstances in which it is, in accordance with the law or practice and usage customary among bankers, necessary or appropriate for the Regional Rural Bank to divulge. (2) Every director, member of a committee or auditor, officer or other employee of a Regional Rural Bank shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the Schedule to this Act. Bar to liquidation of Regional Rural Bank. 26. Bar to liquidation of Regional Rural Bank.- No provision of law relating to the winding up of companies shall apply to a Regional Rural Bank and a Regional Rural Bank shall not be placed in liquidation save by order of the Central Government and in such manner as it may direct. Defects in appointment or constitution not to invalidate acts orproceedings. 27. Defects in appointment or constitution not to invalidate acts or proceedings.- (1) No act of a Chairman, acting in good faith, shall be invalid merely by reason of any defect in his appointment or in the procedure. (2) No act or proceeding of any Board of directors or of any committee of a Regional Rural Bank shall be invalid merely on the ground of the existence of any vacancy in, or defect in the constitution of, such Board or committee, as the case may be. ---------------------------------------------------------------------- 1. Ins. by Act 1 of 1988, s. 13 (w.e.f. 28-9-1988). 2. Ins. by s. 14, ibid (w.e.f. 28-9-1988). 274 (3) Acts done by a person, acting in good faith, as a director or member of a committee of a Regional Rural Bank shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in any law for the time being in force: Provided that nothing in this section shall be deemed to give validity to any act done by a director or a member of any committee of a Regional Rural Bank after his appointment has been shown to the Regional Rural Bank to be invalid or to have terminated. Indemnity of directors, etc. 28. Indemnity of directors, etc.-(1) A director or a member of a committee of a Regional Rural Bank shall not be responsible for any loss or expense caused to such bank by insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf of a Regional Rural Bank or by the insolvency or wrongful act of any customer or debtor or anything done in, or in relation to, the execution of the duties of his office, unless such loss, expense, insufficiency or deficiency was due to any wilful act or default on the part of such director or member. (2) The Chairman of a Regional Rural Bank and every officer of the Central Government or State Government or an officer of the Reserve Bank 1*[or the National Bank] or the Sponsor Bank and every officer or other employee of a Regional Rural Bank shall be indemnified by such bank against all losses and expenses incurred by him in, or in relation to, the discharge of his duties except such as have been caused by his own wilful act or default. Power to make rules. 29. Power to make rules.- (1) The Central Government may, after consultation with the 2*[National Bank] and the Sponsor Bank, by notification in the Official Gazette, make rules for carrying out the provisions of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-- (a) the manner in which the additional number of members of the Board may be filled in, under sub-section (2) of section 9; (b) the time and place at which the Board of directors of a Regional Rural Bank shall meet and the rules of proce- -----------------------------------------------

1. Ins. by Act 1 of 1988, s. 15 (w.e.f. 28-9-1988). 2. Subs. by s. 16, ibid., for "Resever

Bank" (w.e.f. 28-9-1988). 275 dure which shall be observed by the Board in regard to the transaction of business at its meetings, under sub- section (1) of section 14; 1*[(ba) the manner in which the officers and other employees of the Regional Rural Banks shall be appointed;] (c) any other matter which is required to be, or may be, prescribed. (3) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule. Power to make regulations. 30. Power to make regulations.- 2*[(1)] The Board of directors of a Regional Rural Bank may, after consultation with the Sponsor Bank and the 3*[National Bank] and with the previous sanction of the Central Government 4*["by notification in the Official Gazette,] make regulations, not inconsistent with the provisions of this Act and the rules made thereunder, to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act. 5*[(2) Every regulation shall, as soon as may be after it is made under this Act by the Board of directors, be forwarded to the Central Government and that Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation."] Removal of difficulties. 31. Removal of difficulties.- If any difficulty arises in giving effect to the provisions of this Act, the Central Government may make such order, not inconsistent with the provisions of this Act, as may appear to it to be necessary for the purpose of removing the difficulty: Provided that no such order shall be made after the expiry of a period of five years from the commencement of this Act. Act to override the provisions of other laws. 32. Act to override the provisions of other laws.-The provisions of this Act shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force or in any contract, express or implied, or in any instrument having effect by virtue of any law other than this Act, and notwithstanding any custom or usage to the contrary. -------------------------------------

2. S. 10 renumbered as sub-section (1) thereof by Act 1 of 1984, s. 70 (w.e.f. 15-2-1984). 1. Ins. by Act 1 of 1988, s. 16 (w.e.f. 28-9-1988). 3. Subs. by Act 1 of 1989 s. 17, for "Reseve Bank" (w.e.f. 28-9-1988). 4 Ins. by Act 66 of 1988, s. 34 (w.e.f. 30-12-1988). 5. Ins. by Act 1 of 1984, s.20 (w.e.f. 15-2-1984). 276 CHAP AMENDMENT OF CERTAIN ENACTMENTS CHAPTER VII AMENDMENT OF CERTAIN ENACTMENTS Not printed. Repeal and savings. 34. [Repeal and savings.] Not printed. SCHE See section 25(2) THE SCHEDULE [See section 25 (2)] I,...................., do hereby declare that I will faithfully, truly and to the best of my skill and ability execute and perform the duties required of me as a director, member of a committee, officer, employee or auditor (as the case may be) of the Regional Rural Bank and which properly relate to any office or position in the said Bank held by me. I further declare that I will not communicate or allow to be communicated to any person not legally entitled thereto any information relating to the affairs of the Regional Rural Bank or to the affairs of any person having any dealings with the Regional Rural Bank, nor will I allow any such person to inspect or have access to, any books or documents belonging to, or in the possession of the Regional Rural Bank and relating to the business of the Regional Rural Bank, or to the business of any person having any dealings with the Regional Rural Bank. Signature. Signed before me. Dated

Some of RRBs are

(1) Madhya Bharat Gramin Bank (Madhya Pradesh, India)

A joint venture of Government of India, State Bank of India & State Government of Madhya Pradesh. Madhya Bharat Gramin Bank is established on 30.06.2006 by amalgamation of 3 Regional Rural Banks sponsored by State Bank of India namely Damoh Panna Sagar Kshetriya Gramin Bank, Shivpuri Guna Kshetriya Gramin Bank & Bundelkhand Kshetriya Gramin Bank under the notification issued by Govt. of India (Ministry of Finance). These amalgamated RRBs were joint venture company established under Regional Rural Bank Act 1976 (23 of 1976). The capital structure consisted of Govt. of India (50%), State Bank of India (35%) & State Government of Madhya Pradesh (15%).

The Head office of the bank is at Sagar (M.P.). The Bank is serving rural masses through its 221 branches covering 8 districts of state of Madhya Pradesh namely Sagar, Damoh, Panna, Shivpuri, Guna, Ashoknagar, Tikamgarh & Chhatarpur.

(2) Assam Gramin Vikash Bank (Assam, India)

In Assam all together five RRBs were opened at different point of time beginning with Pragjyotish Gaonlia Bank. The pro-active attitude and the rural bias of these banks culminated not only in the creation of thrift habit among the rural masses but also in the dispensation of credit to such people mostly for priority sector activities. Govt. of India vide Notification No. F.1.(25)/2005 dated 12th January 2006 amalgamated the four Regional Rural Banks sponsored by the United Bank Of India in the state of Assam to form Assam Gramin Vikash Bank (AGVB).

The erstwhile RRBs amalgamated were Pragjyotish Gaonlia Bank (Estd. 06-07-1976), Lakhimi Gaonlia Bank (Estd. 29-07-1980), Cachar Gramin Bank (Estd. 31-03-1981) and Subansiri Gaonlia Bank (Estd. 30-03-1982).

Thus Assam Gramin Vikash Bank (AGVB) has come into existence from 12th January 2006 covering the areas of operation of the of the pre-amalgamated RRBs with its Head Office at Guwahati. The Bank covers 25 out of 27 districts of the State through its strong network of 355 branches. While AGVB’s genesis has its roots in the interest of the customers, stakeholders and the staff, the broader objectives of the amalgamation are: »Better customer service from better infrastructure, branch computerization, pool of experienced work force, unified publicity and marketing efforts. »Reaping economies of scale with larger area of operation, enhanced credit exposer limits. »Opportunities for diverse banking activities, leading to higher business growth. Looking back at the post amalgamation period, it is noteworthy that the metamorphosis of the RRBs with different cultures and practices, into a single large entity with shared culture has been extremely smooth. The advent of AGVB had a positive impact, particularly in the areas of Business growth and operational matters.

(3) Durg Rajnandgaon Gramin Bank(Chattishgarh, India)

The Bank was established on 12th March 1980, under the provisions of Section 3 of the Regional Rural Banks Act, 1976, and in terms of Extra Ordinary Gazette Notification No. F1-1/80 RRBs (1)&(2) dated 12-03-1980.The Bank is a Scheduled Bank, vide Reserve Bank of India Notification NO. RPCD No. 176/ INCL/311-80 dated 12-03-1980, listed under the Second schedule of Reserve Bank of India. The Bank is a joint undertaking of Government of India, Government of Chhattisgarh and Dena Bank. The Bank is sponsored by Dena Bank.At present, the area of operation of the Bank is situated in Durg, Rajnandgaon and Kawardha Districts in the State of Chhattisgarh.The Bank is having 110 branches, the largest network of branches in the area, there are 63 branches in Durg, 38 in Rajnandgaon and 9 in Kawardha District.

(4) Himachal Gramin Bank (Himachal Pradesh, India)

The Bank came into existence on 23 December 1976, under the provisions of Section 3 of the Regional Rural Banks Act, 1976 (No. 21 of 1976) with its Head Office at Mandi (H.P.). The Bank is sponsored by Punjab National Bank. The Bank is incorporated as a Scheduled Bank in Schedule - II of Reserve Bank of India Act, 1934 and is authorized to affect banking transactions as permitted under section 5(b) of Banking Regulations Act, 1949.

(5) South Malabar Gramin Bank (Kerela, India)

Established in December 1976, with Head Quarters at Malappuram, Kerala state in South India. Equity of Rs 1Crore held by Government of India (50%),Government of Kerala (15%) and Canara Bank (35%).Management expertise provided by Canara Bank, a leading Public Sector Bank. The Primary objective of the Bank is to finance farm & non-farm sectors and other employment generation programs. Operates in 8 Districts with, 229 Branches, 5 REGIONAL/Area offices. A staff strength of 1555. A Clientele base of nearly 2 million depositors and one million borrower clients Rated as one of the World's 50 largest Micro Credit Institutions. A novel project "SNEHAGRAMAM" clubbing twin objective of Total Financial Inclusion and Money-lender-free villages launched.


Reserve Bank India page for Regional Rural Banks of India==References==

[[ http://articles.economictimes.indiatimes.com/keyword/regional-rural-banks%7CEconomic Times articles on regional-rural-banks]]

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