Performance Evaluation of Regional Rural Banks: Evidence from Indian Rural Banks

Abstract

The origin of the regional rural banks (RRBs) can be traced to the need for stronger institutional arrangements for providing rural credit. The inception of RRBs can be seen as a unique experiment as well as an experience in improving the efficacy of rural credit delivery mechanism in India. In the wake of the introduction of financial sector reforms, the feasibility of RRBs emerged as the most crucial factor in deciding the desired role due to their limited business flexibility with hardly any scope of diversification, smaller size of loans with higher exposure to risk-prone advances and professional inefficiency in financial deployment. In order to strengthen RRBs and to improve their performance, various initiatives have been taken by the Government of India and the Reserve Bank of India (RBI). The article, therefore, is a synopsis on the evaluation of performance of RRBs in India with respect to deposit mobilization, credit channelization, credit–deposit (C/D) ratio, deployment of credit to various occupations, etc.