RRBs & Co-operative — Set 1

Correct Answer: A. 1975

• **1975** = Regional Rural Banks were first established on 2 October 1975 via the RRB Ordinance 1975, the same day as Gandhi Jayanti. • **Prathama Bank** — The very first RRB to start operations was Prathama Bank in Moradabad, UP, inaugurated on that date. • The move followed the Narasimham Working Group's recommendation to bridge the gap between commercial banks and rural moneylenders. • 💡 Option B (1991) is wrong because 1991 marks India's LPG economic reforms, not RRB creation; Option C (1969) is wrong because 1969 saw the nationalisation of 14 banks, not RRB formation; Option D (1982) is wrong because 1982 is when NABARD was established, not RRBs.

Correct Answer: C. RRB Act 1976

• **RRB Act 1976** = The Regional Rural Banks Act 1976 is the primary legislation providing the legal framework for the organisation, registration, and operation of RRBs. • **Ordinance replaced** — The 1976 Act replaced the original RRB Ordinance of 2 October 1975 and gave these banks a permanent statutory basis. • The Act defines the shareholding pattern (50:35:15), area of operation, and the role of the Sponsor Bank. • 💡 Option A (Banking Regulation Act 1949) is wrong because it governs commercial banks generally, not RRBs specifically; Option B (RBI Act 1934) is wrong because it deals with the establishment of the RBI itself; Option D (Companies Act 2013) is wrong because RRBs are not companies — they are statutory bodies under their own dedicated Act.

Correct Answer: B. 50%

• **50%** = The Central Government holds exactly 50% of the equity share capital in every Regional Rural Bank. • **Tripartite structure** — The remaining 50% is split: Sponsor Bank 35% + State Government 15%, making the Central Government the single largest shareholder. • This majority stake ensures RRBs remain aligned with national rural-credit policy priorities. • 💡 Option A (100%) is wrong because RRBs are jointly owned, not solely by the Centre; Option C (35%) is wrong because 35% is the Sponsor Bank's share, not the Centre's; Option D (15%) is wrong because 15% is the State Government's share.

Correct Answer: D. 35%

• **35%** = The Sponsor Bank — always a public sector commercial bank — contributes 35% of the equity capital of the RRB it sponsors. • **Managerial role** — Beyond equity, the Sponsor Bank provides managerial expertise, personnel on deputation, and technical assistance in the bank's formative years. • A single Sponsor Bank may sponsor more than one RRB across different states. • 💡 Option A (50%) is wrong because 50% is the Central Government's share; Option B (25%) is wrong because no stakeholder holds exactly 25% in the RRB capital structure; Option C (15%) is wrong because 15% is the State Government's contribution.

Correct Answer: A. 15%

• **15%** = The concerned State Government holds exactly 15% of the equity in the RRB operating within its territory. • **Policy alignment** — This 15% stake ensures the bank tailors its lending activities to the state's rural-development priorities and local crop patterns. • The tripartite ownership (50:35:15) is unique to RRBs and does not apply to any other bank category in India. • 💡 Option B (50%) is wrong because 50% is the Central Government's share; Option C (10%) is wrong because no stakeholder holds 10% — the State's statutory share is fixed at 15%; Option D (35%) is wrong because 35% is the Sponsor Bank's share.

Correct Answer: B. M. Narasimham

• **M. Narasimham** = The Working Group on Rural Banks was chaired by M. Narasimham, then a senior RBI official, and submitted its report in 1975. • **Dual-mandate design** — Narasimham recommended institutions that combined the local knowledge of co-operatives with the professional efficiency of commercial banks, leading to the RRB model. • The first five RRBs were established immediately on 2 October 1975 based on his report. • 💡 Option A (R.H. Sarma) is wrong because Sarma chaired a later committee on RRB recapitalisation, not the founding working group; Option C (V.M. Dandekar) is wrong because Dandekar is associated with poverty-measurement studies, not RRB creation; Option D (B. Sivaraman) is wrong because Sivaraman headed the committee on integrated rural development programmes, not RRBs.

Correct Answer: A. Prathama Bank

• **Prathama Bank** = Prathama Bank, located in Moradabad, Uttar Pradesh, was the first RRB to begin operations on 2 October 1975, sponsored by Syndicate Bank. • **Gandhi Jayanti launch** — All five initial RRBs were inaugurated on Gandhi Jayanti to symbolise commitment to Gandhian values of rural self-sufficiency. • Prathama Bank served small farmers, artisans, and agricultural labourers in the Moradabad district. • 💡 Option B (Gorakhpur Kshetriya Gramin Bank) is wrong because it was also among the first five RRBs but was not the very first; Option C (Haryana Kshetriya Gramin Bank) is wrong because it was set up in Haryana, not in UP where the first RRB was registered; Option D (Gaur Gramin Bank) is wrong because it came into existence after the initial batch of five RRBs.

Correct Answer: B. NABARD

• **NABARD** = The National Bank for Agriculture and Rural Development (NABARD) is the apex institution responsible for statutory inspection and supervision of all RRBs. • **Established 12 July 1982** — NABARD was set up under the NABARD Act 1981, taking over supervisory functions over RRBs from the RBI. • NABARD conducts annual inspections and issues directions on income recognition, asset classification, and provisioning norms for RRBs. • 💡 Option A (Ministry of Finance) is wrong because it provides policy oversight but does not conduct statutory bank inspections; Option C (SEBI) is wrong because SEBI regulates capital markets, not banking institutions; Option D (RBI) is wrong because the RBI transferred its supervisory powers over RRBs to NABARD in 1982, retaining only licensing authority.

Correct Answer: B. 75%

• **75%** = RRBs are mandated to lend at least 75% of their total credit to priority sectors — agriculture, small enterprises, and weaker sections. • **Nearly double commercial banks' target** — Domestic scheduled commercial banks have a PSL target of only 40%, making the RRB target reflect their specialised rural mandate. • Within the 75%, sub-targets exist: agriculture at 18% of ANBC and weaker sections at 15%. • 💡 Option A (100%) is wrong because RRBs can lend up to 25% outside priority sectors; Option C (40%) is wrong because 40% is the PSL target for domestic scheduled commercial banks, not RRBs; Option D (60%) is wrong because no RBI or NABARD circular sets the RRB PSL target at 60%.

Correct Answer: B. Goa

• **Goa** = Goa is the only state among the given options that has no Regional Rural Bank operating within its territory. • **Urbanised economy** — Goa has high banking penetration through commercial and urban co-operative banks; Sikkim is another state without an RRB. • Nationwide RRB numbers fell sharply due to government-mandated amalgamation drives in 2005-06 and 2012-13. • 💡 Option A (Manipur) is wrong because Manipur Rural Bank operates there; Option C (Meghalaya) is wrong because Meghalaya Rural Bank serves the state; Option D (Tripura) is wrong because Tripura Gramin Bank operates in Tripura.