SYNOPSIS

TITTLE OF THE PROJECT:

A STUDY OF RURAL BANKING IN INDIA

INTRODUCTION:
Rural development occupies a significant place in the overall economic development of the
country. Gandhiji Said ―India lives in Village. He stressed a rural character of economy and the
need for re-generation of rural life. Since independence, it has been constant endower of our
policy maker to give adequate trust to rural development as the sector is directly related to
agriculture. Rural banking in India started since the establishment of banking sector in India.
Rural Banks in those days mainly focused upon the agro sector. Regional rural banks in India
penetrated every corner of the country and extended a helping hand in the growth process of the
country. SBI has 30 Regional Rural Banks in India known as RRBs. The rural banks of SBI are
spread in 13 states extending from Kashmir to Karnataka and Himachal Pradesh to North East.
The total number of SBIs Regional Rural Banks in India branches is 2349 (16%). 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. Regional Rural Banks (RRB) was established under the provisions
of an ordinance promulgated on the 26th September 1975 and the RRB Act, 1976 with an
objective to ensure sufficient institutional credit for agriculture and other rural sectors.

OBJECTIVES OF STUDY:
 To analyze the usage of bank facility by the rural customer
 To trace out the genesis and concepts of rural banking.
 To know the reasons for unprofitable of rural banking in India.
 To identify the cost per transaction of Indian Banks and purpose of borrowings.

PROBLEM STATEMENT:
Even if access to formal banking is provided to rural customers, there is no guarantee that these
services will be used. According to a study conducted by the World Bank, many households,
even in developed countries, choose not to have a bank account as they do not engage in many
financial transactions they collect wages in cash, spend in cash and do not wish to be burdened
by a bank account. To compound the situation many customers in rural India, who have access to
and would otherwise choose to use formal financial services, do not do so because the product
and service mixes do not meet their needs. The financial service needs of rural customers are not
confined to just savings and credit, as is usually assumed. Their financial needs are linked to
their life cycle needs, ranging from savings to credit to insurance to remittances. In fact, even the
savings and credit products currently offered to rural customers do not entirely meet their needs.
Access to savings and investment facilities is critical for the poor.
The two critical needs for the rural poor are micro-savings and frequent withdrawals. These
needs facilitate a customer in building capital over the long term, as well as coping with income
shocks in the near term. However, banks do not offer adequate services to address these needs.
The lack of services, therefore, leaves the rural poor with little option than to transact with the

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informal banking market. A study conducted by Micro Save also concludes that the poor transact
with the informal sector because it will accept small amounts, provide doorstep service, and
ensure ease of enrolment. Rural customers need loans not only for productive purposes but also
for consumption needs (Following Table). A part from agricultural support, rural customers need
micro credit for consumption, education and emergencies. Though banks offer purpose free loans
(personal loans and credit cards) in urban areas quite liberally, in rural areas sanction of such
loans is significantly restricted. Therefore, the poor raise these loans through the informal
financial system (it is worth noting that these loans taken from the informal system are almost
always repaid or renewed). In addition, larger households need occasional high value micro-
enterprise loans for small capital investment. Though banks offer these loans, they require
excessive documentation and time-consuming processes which discourage customer
applications.

LITERATURE REVIEW:
The Narsimhan working group was established by the central government in 1975 to study the
possibilities of profitable banking in rural India. The abstract of report of this committee is stated
in the introduction part of this project. The result of this report is the establishment of RRB act
1976 & establishment of RRBs, specialized banking for Rural India. This was the base of RRBs
in India. In our project report we have taken abstract from the report of Narsimhan committee.

The part which contains information about definitions of RRBs and its various functions,
authorities, capital structure, stake of government, stake of sponsor banks, stake of state,
definitions about office holding are all taken from the Regional rural Banks Act, 1976.

Some information about the performance of RRBs up to 1990 has been taken from the report of
Sukanya Bose. The topic which talks about the revamp of RRBs has been taken from an article
on sify finance which is based on Chakrabarty committee report. This committee was set to
design various restructuring strategies for RRBs better functioning. Besides this we have studied
many articles on RRBs.

RESERCH METHODOLOGY:

1. Introduction: Research is a process of collecting and analyzing and ultimately to arrive at a

certain conclusion. This research is done for the purpose of arriving at a conclusion about the
RRBs & how they can be improved to achieve 100% financial inclusion.

2. Data source: The various sources of Information Broadly divided in two categories
1. Primary source: Source from where first hand information is gathered directly is called
primary data. In this study I will collect primary data through interviews and questionnaires.
2. Secondary source: The data that collected for other purpose already exists somewhere is
called secondary data. With regard to my study the secondary sources where records of the
company’s data base, websites, previous research on relevant topic

3. Research type: This is an exploratory research; exploratory research provides insight into and
comprehension of an issue or situation. It should draw definitive conclusions only with extreme

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caution Exploratory research is a type of research conducted because a problem has not been
clearly defined.

4. Data collection technique:

1. Primary data:- Personal communication, Questionnaire method
2. Secondary data:- Website, company Data base and previous studies

5. Research Design: Honest efforts will be made to focus on the objectives under taken through
Collection of data. Primary data will be collected mainly to get factual status of rural banking in
India which has helped to have in-depth analysis of the problem. Secondary data will be
collected from libraries, journals, earlier related studies, etc. Various reports published by project
managers related to project will be considered for understanding the problems for understanding
the customer’s satisfaction.

6. Research Problem: To make the analysis of rural banking in India through the following
sources of information
a) Historical information about rural banking.
b) Efforts by key stake holders.
c) Partnership between banks and business correspondents.
d) Banks products and services to meet rural needs.

LIMITATIONS:
1. Inadequate response from Customers in rural areas & employees of Gramin banks at first
interaction.
2. Inability of some of the rural people to understand the importance of our study.
3. The time constraint may be one of the major problems.
4. The lack of information sources for the analysis part.
5. Limited interaction with the concerned heads due to their busy schedule.
8. The findings of the study will be based on the information retrieved by the selected unit.

REFERENCES:

BOOKS
 Bagchi, Amiya Kumar (2004) “Rural Credit and Systematic Risk”, in Ramachandran and
Swaminathan.
 C P Chandrsekar C P and Ray, Sujit Kumar (2004), “Financial Sector Reform and the
Transformation of Banking”, in Ramachandran and Swaminathan.
 Chandrasekar C P and J Ghosh 2002 The Market that failed A Decade Neoliberal
Economic reforms in India New Delhi: Left word books.
 Chavan, P and R Ramakumar, 2002 “Micro credit and Rural poverty: Analysis of
empirical evidence”, Economic and political Weekly, 37, 10 pp 955-965.
 Chavan, Pallavi (2004), Banking Sector Liberalisation and the Growth and Regional
Distribution of Rural Banking”, in Ramachandran and Swaminathan.
 Griffin, K 1975, ‘The political Economy of Agrarian Change. London: Macmillan.
 Indian School of Women’s studies and development, 2004, “Women workers in Rural
Haryana, A field based study”.

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  Johnson S and Rogaly B 1997 Micro finance and poverty Reduction, U K and Ireland:
OXFAM and Action Aid.

WEBSITES
1. www.rbi.com
2. www.google.com
3. www.economictimes.com
4. www.bggb.com
6. www.nabard.com

BANKING REPORTS:
1. World Bank 2014
2. Reserve Bank of India 2015
3. www.cia.gov
4. National Sample Survey Organization (NSSO), Household Consumer Expenditure in India
(2015)
5. National Sample Survey Organization (NSSO) 2007
6. Access to and Usage of Financial Services, World Bank 2010
7. RFAS, 2008, World Bank & NCAER
8. Reserve Bank of India, www.rbi.org.in
9. Access to Financial Services by Stijin Claessens, World Bank 2005
10. Rutherford Stuart, “The Poor and their Money,” January 2000
11. www.microsave-africa.com
12. RFAS 2008, World Bank
13. Bharat Nirman is a four year business plan of the Government of India to improve rural
infrastructure
14. National Sample Survey Organization (NSSO) 2007