Role of RRBs For Financial Inclusion Awareness in Rural India: Prospects and Challenges

Financial inclusion plays a vital role in the economic growth of developing countries such as India. Financial inclusion is one of the important model that ensures the availability of financial or banking services to the weaker sections, low-income and vulnerable groups at a fair and affordable price. In present circumstances, financial inclusion is prime concern of the developing countries to eliminate poverty and lower the gap between rich and poor. In India, Reserve Bank of India (RBI) is the apex regulator and supervisor of the financial system, that provides banking services at a reasonable cost in the India. Under the regulation of RBI, banking sector has grown significantly over the years. Unfortunately, mostly banking services in India grow in urban sectors. For a many reasons, rural sectors are deprived of the basic banking services in their regions. The reasons are cash dependency, lack of financial literacy, limited access to banking services, security concerns and limited infrastructure. Consequently, government of India established Regional Rural Banks (RRBs) with the intent to bring banking services closer to the rural and agricultural communities. However, over some time it has been observed that these banks are not able to meet the desired objectives mainly because of certain problems such as lack of capital, lack of trained personnel, high cost operations, dependence on sponsor banks. Therefore, it is necessary to study challenges faced by RRBs in their growth and how they can overcome these challenges and expand their banking services among rural population. This study is based on secondary data collected from the annual reports of RBI, NABARD, websites, journals and research papers. The study finds and concludes that performance of RRBs can be improve and they will significantly contribute in the expansion of financial services in rural and backward areas.