Academic journal article International Journal of Education and Management Studies

Financial Analysis of Regional Rural Banks in Haryana

Academic journal article International Journal of Education and Management Studies

Financial Analysis of Regional Rural Banks in Haryana

Article excerpt

(ProQuest: ... denotes formulae omitted.)

Establishment of regional rural banks

Commercial banks started venturing into the rural areas after 1969. There was a massive country wide expansion of commercial banks branches in rural and semi-urban areas in the first half of seventies under the lead Bank Scheme. However, inspite of the sincere efforts of the banks and phenomenal expansion of their rural branch network, it was felt that the main social objectives of assisting the realsmall and marginal farmers and other neglected sectors of rural population was not being achieved to the desired extent. Continuous display of poor performance of the Cooperatives and the inability of the banks to expand due to high cost and inadequate local involvement, the expansion of rural credit needs due to 20-point economic programme and the fear of drying up of traditional sources of credit due to legislature measures were the factors that led to rethinking about the creation of a chain of rural banks. The Banking Commission (1972) under the chairmanship of sh. R.G Saraiya had already expressed the views that in a country like India with vast diverse physical, regional, social and economic features, no single pattem of financial institution could expressed to handle the task of meeting credit gap in the rural areas and deal with the complex problems of agricultural credit. The commission had favoured the establishment of rural banks sponsored by scheduled commercial banks. The Working Group on Rural Banks (1975) recommended the establishment of RRBs to supplement the efforts of the commercial banks and cooperatives in extending credit to weaker section of the rural community small and marginal farmer's landless labourers, artisans and other rural residents of small means. The intention in having these new banks was that there should, in the Indian context, be an institutional device which combined the local feel and familiarity with the rural problems which the Cooperatives possessed and the degree of business organisation and modernized outlook which the commercial banks had, with a view to reaching the rural poor needed was a low cost, low profile credit institution. (Puri & Mishra, 2013)

The Government of India accepted the recommendations of Narasimhan Working Group and accordingly the Regional Rural Banks ordinance of 1975 was promulgated by the President of India on 26th of September, 1975. Initially five RRBs were set up on October 2, 1975 at Moradabad and Gorakhpur in Uttar Pradesh, Bhiwani in Haryana, Jaipur in Rajasthan and Malda in West Bengal. Each RRB had an authorized capital of Rs. 1 crore, share capital of the RRB was subscribed by the Central Government (50%), the State Government concerned (15%) and sponsoring commercial bank (35%). On 9th Feb, 1976, the Regional Rural Banks Ordinance was subsequently replaced by the Regional Rural Banks Act 1976.

Objectives of RRBs

* To take the banking services to the door-steps of rural masses particularly in hitherto unbanked areas and make available institutional credit to the weaker sections of the society who had so far little or no access to cheaper loans and had perforce been depending on the private money-lenders.

* To mobilize rural savings and channelize them for supporting productive activities in the rural areas, create supplementary channel for the flow of credit from the central money market to rural areas through refinance and generate employment opportunities in rural areas.

Financial position ofRRBs of Haryana

This study analyzes the financial position ofRRBs of Haryana. The financial analysis is the process of identifying the financial strengths and weaknesses of the organization by properly establishing a relationship between the items of balance sheet and profit and loss Account. It helps the concerned parties to form an opinion about the operating performance and financial position of the concerned to take suitable action to decide about the future course of action. …

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