The Hindu Business Line : Role of RRBs

This is with reference to "A new role for RRBs" (Business Line, June 1) It is true that income from investments has brought the regional rural banks back into the black. However, some of the RRBs seem to have forgotten the purpose for which they were established.

When the Government permitted them to lend for non-farm activities and to invest in government securities, some of the RRBs conveniently preferred the investment route, thereby neglecting the farm sector.

It is also true that the sponsoring banks are pressuring the RRBs to show increased profits year after year. Unfortunately, the RRBs have several masters, with none willing to come forward to guide them or solve their problems. Though, to certain extent, the sponsoring banks guide them, the clash of interests is an ever-present undercurrent. In certain cases, the RRBs are even seen as a potential threat to the sponsoring bank, which sometimes does not permit the rural banks to open more branches.

One way to make RRBs development finance entities in their own right is to delink them from the sponsoring bank.

The Government should reduce the number of RRBs, allowing only one RRB to function in each State. Importantly, there should be only one authority to control the entities. Unless the Government takes early corrective steps, it will not be possible to get the expected results from the rural banks in the near future.

V. Nadanasabapathy

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