The Regional Rural Banks (RRBs) are fast losing not only their ‘regional and rural’ character but, unfortunately, their inherent social banking nature, the very purpose of their establishment fifty years ago. Started with five RRBS ~ one each in West Bengal, Rajasthan and Haryana and two in UP ~ on a pilot basis, on 2 October 1975, they are now spread to 700 districts in 26 States and three union territories, Puducherry, Jammu and Kashmir, and Ladakh; only two states, Goa and Sikkim, and five union territories do not have an RRB, yet.

The reform measures introduced in the RRB sector in different phases starting from the early 1990s were definitely not with the intent to strengthen their original goals, which they had admirably delivered in certain respects, but with new tasks, pure commercial as opposed to social benefit. The new approach of the government guided by the goals of the overall neo-liberal economic policies, has facilitated the changes, regardless of the fact that the rural credit doesn’t fit into the market forces doctrine in view of its critical importance in developing the farm sector, farmers’ welfare, and rural employment. Moreover, the RRBs’ experiment was far superior to all the earlier measures put in place since the early years of independence for strengthening rural institutional credit.

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A cursory review of the earlier steps for strengthening rural institutional credit reveals the importance of RRBs, particularly the current need to revive their establishment goals. Even the British government, for whom their own colonial interest was supreme, had to focus its attention on the government’s lending to the farm sector, as evidenced by passing of the consolidated law, the Land Improvement Loans Act in 1883. To facilitate the setting up of rural credit societies, the government enacted the first-ever cooperative Act in the country in 1904; it subsequently brought subject of the cooperatives under the states’ legislative competence........

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