Comparative study of Dove &Loreal Product in Ghazipur

SURVEY PROJECT REPORT

Submitted to

Veer Bahadur Singh Purvanchal University, Jaunpur

In partial fulfillment of the requirements of the degree of
BACHELOR OF BUSINESS ADMINISTRATION
Submitted ByNabila Parwej

Under the Supervision of:

Mr. Vijay Kumar Pandey
BBA IV Semester
Assistant Professor
Roll No. -5460037
Dept. of Business Administration

2014

Technical Education & Research Institute,PostGraduate College, RavindrapuriGhazipur (U.P.) Pin-233001

Certificate
This is to certify that Nabila Parwejpursuing BBA 4thSemester from this Institute
has prepared the Research project report entitledComparative study of Dove
&Loreal Product in Ghazipur inpartial fulfillment of the requirements of the
degree of Bachelor of Business Administration from V.B.S. Purvanchal
University, Jaunpur, for the session of 2013-2014.
This report is based on bona fide research undertaken by ShreyaUpadhyayunder
my supervision during the course of fourth semester and fulfills the requirements
of regulations relating to the nature and standard of B.B.A. course of V.B.S.
Purvanchal University.
I recommend that this research project report may be sent for evaluation.

Rahul Anand Singh

Head,

ArifSultam Associate Professor &

Assistant Professor,

Dept. of Business Administration

Dept. of Business Administration

Declaration
I, JyotiMauryahereby declare that this survey project report entitled
Market Analysis and Consumer Preference for Hair Color Brand in
Ghazipur has been prepared by me on the basis of survey done during the
course of my fourth semester of BBA programme under the supervision of
Mr. Arif Sultan, (Assistant Professor)department of business administration T
E R I, Ghazipur.
This survey project report is my work and has not been submitted in
any university or Institute for the award of any degree or diploma prior to the
under mentioned date. I bear the entire responsibility of submission of this
project report.

30th May 2014

NavilaParvajBBA IV Semester
Department of Business Administration
Technical Education & Research Institute
P.G. College Ghazipur

Index of Contents
Preface
Acknowledgement
CHAPTER -1
Introduction to the topic
Objective
Importance
Scope
CHAPTER-2
Research Methodology
CHAPTER-3
Data Analysis & Interpretation
CHAPTER-4
Finding
Recommendations
CHAPTER-5
Conclusion

Limitation
Annexure ( Questionnaires )
Bibliography

PREFACE
The first real insight of an organization for management student comes only during his
preparation of project work because student first interacts with real practical work. This is first
introduction to industry and its working. This project work synthesize the theoretical concept
learn in the class room and its practical orientation in organization.
In my project I have studied theMarket Analysis and Consumer Preference for Hair
Color Brand in Ghazipur.
The First chapter deals with the introduction of the topic, it also describes the profile and
history of Hair color brands.
In first chapter I have mentioned institute. This chapter also describes the organizational
structure of both the organization. The objective and need of research is also mentioned in
section of project work.
The Second chapter deals with research methodology. The process of carrying out the
whole research problem is defined in it. It contains information about the objectives of the
research, methods of data collection, sampling and sample design.
Third chapter is data analysis and interpretation. This is the most important section of the
project work. This section contains the analysis of all the data collected so far and they are
interpreted to produce the final conclusion. It contains all the tables and charts which depicts the
result.

Chapter four contains the finding and recommendation of the research. This is based on
the data analyzed and interpreted in the previous chapter. This is the most important section of
the research report for a report is evaluated on the validity ad correctness of findings.
Chapter five depicted conclusion which concludes the whole report, that is, gives a brief
description of the process employed so far. And later chapters contain bibliography. Which
describes the list of sources from where the matter and information is collected? It contains the
list of books, authors, web sites use etc.

JyotiMaurya
B.B.A. IV Sem.

Acknowledgement
Many thanks to the God, who has sent me on this earth and by mercy of him, I would be
able to accomplish this research.

A person who has always encouraged me towards positive and used to say Nothing can
be impossible if you are working hard with heart and soul. The Word regard is very small
for him and I dont know what word will be appropriate for him, that person is my elder Brother
Mr. AnandKashyap

I express my deep sense of gratitude and regards to Mr. ArifSultam (Lecturer, Dept. of
management studies, T.E.R.I., P.G. College affiliated to Veer Bahadur Singh Purvanchal
University) under whose guidance I completed this project, I am thankful to her valuable
guidance, gentle encouragement and pains she took in guiding me throughout the study.

Some of my Friend, Maneeshaand Kajal whose suggestion for what is Right or

Wrong has shown my aim and objectives of life.
Again, I heartily express my regard to all the above person mentioned and pray to the
God May live them long.
NavilaParvej
BBA 4th Sem.

Chapter -1
Introduction

INTRODUCTION

1.

2.

Short title, extent and commencement:-

(1)

This Act may be called the Regional Rural Banks Act, 1976.

(2)

It extends to the whole of India.

(3)

It shall be deemed to have come into force on the 26th day of September, 1975.

Definitions:-

In this Act, unless the context otherwise requires,- "Board", in relation to a Regional Rural Bank, means the Board of directors of that
Regional Rural Bank;
"Chairman", in relation to a Regional Rural Bank, means the individual appointed or reappointed under sub-section (1) of section 11 as the Chairman of that bank;
"Director", in relation to a Regional Rural Bank, means a member of the Board of that
bank;
"Notified area" means the local limits, specified under sub-section (1) of section 3, within
which a Regional Rural Bank shall operate;
"Prescribed" means prescribed by rules made under this Act;
"Regional Rural Bank" means a Regional Rural Bank established under sub-section (1) of
section 3;
"Sponsor Bank", in relation to a Regional Rural Bank, means a bank by which such
Regional Rural Bank has been sponsored.
Review of Literature:RRBs though operate with a rural focus are primarily scheduled commercial banks with a
commercial orientation. Beginning with the seminal contribution of Haslem (1968), the

literature probing into factors influencing performance of banks recognises two broad
sets of factors, i.e., internal factors and factors external to the bank.
The internal determinants originate from the balance sheets and/or profit and loss
accounts of the bank concerned and are often termed as micro or bank-specific
determinants of profitability. The external determinants are systemic forces that reflect
the economic environment which conditions the operation and performance of financial
institutions. A number of explanatory variables have been suggested in the literature for
both the internal and external determinants. The typical internal determinants employed
are variables, such as, size and capital [Akhavein et al. (1997), Demirguc-Kunt and
Maksimovic (1998) Short (1979) Haslem (1968), Short (1979), Bourke (1989),
Molyneux and Thornton (1992) Bikker and Hu (2002) and Goddard et al. (2004)]. Given
the nature of banking business, the need for risk management is of crucial importance for
a banks financial health. Risk management is a reflection of the quality of the assets with
a bank and availability of liquidity with it. During periods of uncertainty and economic
slowdown, banks may prefer a more diversified portfolio to avoid adverse selection and
may also raise their liquid holdings in order to reduce risk. In this context, both credit and
liquidity risk assumes importance. The literature provides mixed evidence on the impact
of liquidity on profitability. While Molyneux and Thornton (1992) found a negative and
significant relationship between the level of liquidity and profitability, Bourke (1989) in
contrast, reports an opposite result. One possible reason for the conflicting findings may
be the different elasticity of demand for loans in the samples used in the studies (Guru,
Staunton and Balashanmugam, 2004). Credit risk is found to have a negative impact on
profitability (Miller and Noulas, 1997). This result may be explained by taking into
account the fact that more the financial institutions are exposed to high-risk loans, the

higher is the accumulation of unpaid loans implying that these loan losses have produced
lower returns to many commercial banks (Athanasoglou, Brissimis and Delis, 2005).
Some of the other internal determinants found in the literature are funds source
management and funds use management (Haslam, 1968), capital and liquidity ratios, the
credit-deposit ratio and loan loss expenses [Short (1979); Bell and Murphy (1969); Kwast
and Rose (1982)]. Expense management, a correlate of efficient management is another
very important determinant of banks profitability. There has been an extensive literature
based on the idea that an expenses-related variable should be included in the cost part of a
96 RESERVE BANK OF INDIA OCCASIONAL PAPERS standard microeconomic
profit function. In this context, Bourke (1989) and Molyneux and Thornton (1992) find
that better-quality management and profitability go hand in hand.
As far as the external determinants of bank profitability are concerned the literature
distinguishes between control variables that describe the macroeconomic environment,
such as inflation, interest rates and cyclical output, and variables that represent market
characteristics. The latter refer to market concentration, industry size and ownership
status. Among the external determinants which are empirically modeled are regulation
[Jordan (1972); Edwards (1977); Tucillo (1973)], bank size and economies of scale
[Benston, Hanweck and Humphrey (1982); Short (1979)], competition [Phillips (1964);
Tschoegl (!982)], concentration [Rhoades (1977); Schuster (1984)], growth in market
[Short (1979)], interest rates as a proxy for capital scarcity and government ownership
(Short, 1979). The most frequently used macroeconomic control variables are the
inflation rate, the long-term interest rate and/or the growth rate of money supply. Revell
(1979) introduced the issue of the relationship between bank profitability and inflation.

He notes that the effect of inflation on bank profitability depends on whether banks
wages and other operating expenses increase at a faster pace than inflation. Perry (1992)
in a similar vein contends that the extent to which inflation affects bank profitability
depends on whether inflation expectations are fully anticipated. The influence arising
from ownership status of a bank on its profitability is another much debated and
frequently visited issue in the literature. The proposition that privately owned institutions
are more profitable, however, has mixed empirical evidence in favour of it. For instance,
while Short (1979) provides cross-country evidence of a strong negative relationship
between government ownership and bank profitability, Barth et al. (2004) claim that
government ownership of banks is indeed negatively correlated with bank efficiency.
Furthermore, Bourke (1989) and Molyneux and Thornton (1992) find ownership status is
irrelevant in explaining profitability. While many of the above factors would be relevant,
it would be instructive to scan the literature that has exclusively focussed on the RRBs.
The literature on RRBs recognises a host of reasons responsible for their poor financial
health. According to the Narasimham Committee, RRBs have low earning capacity. They
have not been able to earn much profit in view of their policy of restricting their
operations to target groups. The recovery position of RRBs is not satisfactory. There are a
large number of defaulters. Their cost of operation has been high on account of the
increase in the salary scales of the employees in line with the salary structure of the
employees of commercial banks. In most cases, these banks followed the same methods
of operation and procedures as followed by commercial banks. Therefore, these
procedures have not found favour with the rural masses. In many cases, banks have not
been located at the right place. For instance, the sponsoring banks are also running their

branches in the same areas where RRBs are operating. The issue whether location matters
for the performance has been addressed in some detail by Malhotra (2002). Considering
22 different parameters that impact on the functioning of RRBs for the year 2000,
Malhotra asserts that geographical location of RRBs is not the limiting factor for their
performance. He further finds that it is the specific nourishment which each RRB
receives from its sponsor bank, is cardinal to its performance. In other words, the
umbilical cord had its effect on the performance of RRBs. The limitation of the study is
that the financial health of the sponsor bank was not considered directly to infer about the
umbilical cord hypothesis. Nitin and Thorat (2004) on a different note provide a
penetrating analysis as to how constraints in the institutional dimension5 have seriously
impaired the governance of the RRBs. They have argued that perverse institutional
arrangements that gave rise to incompatible incentive structures for key stakeholders such
as political leaders, policy makers, bank staff and clients have acted as constraints on
their performance. The lacklustre performance of the RRBs during the last two decades,
according to the authors can be largely attributed to their lack of commercial orientation.

HISTORY OF BANKING:-

As per Banking Regulation Act 1949, Banking means:-

Accepting for the purpose of lending or investment of deposit of money from the public,
repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.

In simple words, bank refers to an institution that deals in money. This institution accepts
deposits from the people and gives loans to those who are in need. Besides dealing in money,
banks these days perform various other functions such as credit creation, agency job and general
service.
Bank, therefore, is such an institution, which accepts deposits from the people, gives loans,
creates credit and undertakes agency work.

Without a sound and effective banking system in India, it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors.

For the past three decades, India's banking system has had several outstanding achievements to
its credit. The most striking is its extensive reach. It is no longer confined to only metropolitan or
cosmopolitan areas in India. In fact, Indian banking system has reached even to the remote
corners of the country. This is one of the main reasons of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with the
nationalization of 14 major private banks of India. Not long ago, an account holder had to wait
for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he
has a choice. Gone are days when the most efficient bank transferred money from one branch to
other in two days. Now it is as simple as instant messaging or dialing for a pizza. Money has
become the order of the day.

COMPOSITION OF THE BANKING SYSTEM IN INDIA AS

AT THE BEGINNING OF NEW MILLENIUM

At present, the number of nationalized banks is 20. Several Foreign banks were allowed to
operate as per the guidelines of RBI. At present the banking system can be classified in following
categories:
PUBLIC SECTOR BANKS:

Reserve Bank of India

State Bank of India and its 7 associate Banks
Nationalized Banks (20 in number)
Regional Rural Banks sponsored by Public sector Banks

PRIVATE SECTOR BANKS:

Old Generation Private Banks

New Generation Private Banks
Foreign Banks in India
Local Area Banks
Non Scheduled Banks

CO-OPERATIVE SECTOR BANKS:

State Co-operative Banks

Central Co-operative Banks
Primary Agriculture Credit Societies
Land Development Banks
Urban Co-operative Banks
State Land Development Banks
Scheduled Co-operative Banks

DEVELOPMENT BANKS:-

Industrial Finance Corporation of India (IFCI)

Industrial Development Bank of India (IDBI)
Industrial Credit & Investment Corporation of India (ICICI)
Industrial Investment Bank of India (IIBI)
Small Industries Development Bank of India (SIDBI)
National Bank for Agriculture & Rural Development (NABARD)
Export-Import Bank of India.
(REGIONAL RURAL BANKS)

Regional Rural Banks in India:The Narasimham committee on rural credit recommended the establishment of Regional Rural
Banks (RRBs) on the ground that they would be much better suited than the commercial banks or
co-operative banks in meeting the needs of rural areas. Accepting the recommendations of the
Narasimham committee, the government passed the Regional Rural Banks Act, 1976. A
significant development in the field of banking during 1976 was the establishment of 19
Regional Rural Banks (RRBs) under the Regional Rural Banks Act1976.
The RRBs were established with a view to developing the rural economy by providing, for the
purpose of development of agriculture, trade, commerce, industry and other productive activities
in the rural areas, credit and other facilities, particularly to small and marginal farmers,
agricultural labourers, artisans and small entrepreneurs, and for matters connected therewith and
incidental thereto .
Offices and agencies:(1)

A Regional Rural Bank shall have its head office at such place in the notified area
as the Central Government may, after consultation with the Reserve Bank and the
Sponsor Bank, specify by notification in the Official Gazette.

(2)

A Regional Rural Bank may, if it is of opinion that it is necessary so to do,

establish its branches or agencies at any place in the notified area.

Authorised capital:-

The authorized capital of each Regional Rural Bank shall be one crore of rupees, divided into
one lakh of fully paid-up shares of one hundred rupees each: Provided that the Central
Government may, after consultation with the Reserve Bank and the Sponsor Bank, increase or
reduce such authorized capital; so, however, that the authorized capital shall not be reduced
below twenty-five lakhs of rupees, and the shares shall be, in all cases, fully paid-up shares of
one hundred rupees each.
Issued capital:-

(1) The issued capital of each Regional Rural Bank shall be twenty-five lakhs of rupees.
(2) Of the capital issued by a Regional Rural Bank under sub-section (1), 50% shall be
subscribed by the Central Government; 15% by the concerned State Government and 35% by the
Sponsor Bank.
(3) The Board may, after consultation with the Reserve Bank, the concerned State Government
and the Sponsor Bank and with the prior approval of the Central Government, from time to time,
increase the issued capital of the Regional Rural Bank; and, where additional capital is issued,
such capital shall also be subscribed in the same proportion as is specified in sub-section (2).

Shares to be approved securities:Notwithstanding anything contained in the Acts hereinafter mentioned in this section, the shares
of a Regional Rural Bank shall be deemed to be included among the securities enumerated in
section 20 of the Indian Trusts Act, 1882 (2 of 1882), and shall also be deemed to be approved
securities for the purposes of the Banking Regulation Act, 1949(10 of 1949).
Management:-

(1) Subject to the provisions of this Act, the general superintendence, direction and management
of the affairs and business of a Regional Rural Bank shall vest in a Board of directors who may
exercise all the powers and discharge all the functions which may be exercised or discharged by
the Regional Rural Bank.
(2) In discharging its functions, the Board shall Act on business principles and shall have due
regard to public interest.
Board of directors:-

The Board of directors shall consist of the Chairman appointed under sub-section (1) of
section 11 and the following other members, namely:-1) Not more than three directors, to be nominated by the Central Government;
2) Not more than two directors, to be nominated by the concerned State Government;
3) Not more than three directors, to be nominated by the Sponsor Bank.

 The Central Government may increase the number of members of the Board; so,
however, that the number of directors does not exceed fifteen in the aggregate and also
prescribe the manner in which the additional number may be filled in.
Term of office of director:-

A director (other than the Chairman) shall hold office for such period not exceeding two years,
from the date when he assumes office, as the authority nominating him may specify at the time
when the nomination is made, and may, on the expiry of the said period, continue to hold office
until his successor has been nominated and shall also be eligible for re-nomination.
Chairman:(1)

The Central Government shall appoint an individual to be the Chairman of a

Regional Rural Bank and specify the period, not exceeding five years, for which
such individual shall, subject to the provisions of sub-section (4), hold office as
the Chairman.

(2)

The individual, appointed as a Chairman under sub-section (1), shall, on the

expiry of the period specified under that sub-section, be eligible for reappointment.

(3)

The Chairman shall devote his whole time to the affairs of the Regional Rural
Bank and shall have, subject to the superintendence, control and direction of the
Board, the management of the whole of the affairs of the Regional Rural Bank.

(4)

The Chairman shall hold office during the pleasure of the Central Government.

(5)

The Chairman shall receive such salary and allowances and be governed by such
terms and conditions of service as may be determined by the Central Government.

(6)

If the Chairman is, by infirmity or otherwise, rendered incapable of carrying out

his duties or is absent, on leave or otherwise, in circumstances not involving the
vacation of office, the Central Government may appoint another individual to act
as the Chairman during the absence of the first-mentioned Chairman.

Meetings of Board:-

The Board of directors of a Regional Rural Bank shall meet at such time and place and
shall observe such rules of procedure in regard to the transaction of business at its
meetings as may be prescribed.
The Chairman of the Regional Rural Bank shall preside over every meeting of the Board,
and, in his absence, such director as the Chairman may generally, or in relation to any
particular meeting, authorise in this behalf shall preside; and, in the absence of both the
Chairman and the director so authorised, the directors present at the meeting shall elect
one from among themselves to preside over the meeting.
Explanation for the purposes of this sub-section, "absence" from a meeting means nonattendance for any reason whatsoever at the meeting, or any part of the meeting during which
any business is transacted.
All questions at a meeting of the Board shall be decided by a majority of the votes of the
directors present and voting; and, in case of equality of votes, the person presiding shall
have a second or casting vote.

 No director shall, as a director, take part in the discussion of, or vote on, any contract,
loan, arrangement or proposal entered into or to be entered into, by or on behalf of the
Regional Rural Bank, if he is, in any way, whether directly or indirectly, interested in the
contract, loan, arrangement or proposal and, where a director is interested in any such
matter, he shall, at the earliest possible opportunity, disclose to the Board the nature of his
interest in such contract, loan, arrangement or proposal, and where he does so, his
presence at the meeting shall not count for the purpose of forming any quorum at the time
of any such discussion or vote, and if he does vote, his vote shall be void:
Provided that nothing contained in this sub-section shall apply to such director by reason only of
his being

A shareholder (other than a director) holding not more than 2% of the paid-up capital in
any public company within the meaning of the Companies Act, 1956 (1 of 1956), or any
corporation established by or under any law for the time being in force in India or any cooperative society, with which the Regional Rural Bank has entered into, or proposes to

enter into, any contract, loan, arrangement or proposal; or

A director of the Regional Rural Bank as such.

Committees of Board:The Board may constitute such committees, whether consisting wholly of directors or wholly of
other persons or partly of directors and partly of other persons, as it may think fit, for such
purposes as it may decide.
Fees and allowances of directors and members of committees:-

 Every director and every member of a committee (other than the Chairman) shall be paid
such fees and allowances as may be determined by the Central Government: Provided
that no fees shall be paid to any director, or member of a committee, if he is an officer of
the Central Government, State Government,
The allowances payable to a director or a member of a committee, who is an officer of
the Central Government, State Government, Reserve Bank, Sponsor Bank or any other
bank, shall be paid by the Government or bank by which such officer is employed; and
the allowances and fees payable to any other director or member of a committee shall be
payable by the concerned Regional Rural Bank.
Staff of Regional Rural Banks:-

A Regional Rural Bank may appoint such number of officers and other employees as it may
consider necessary or desirable for the efficient performance of its functions and may determine
the terms and conditions of their appointment and service:
Provided that it shall be lawful for a Sponsor Bank, if requested so to do by a Regional Rural
Bank sponsored by it, to send, during the first five years of the functioning of a Regional Rural
Bank, such number of officers or other employees on deputation to the Regional Rural Bank as
may be necessary or desirable for the efficient performance of its functions:
Provided further that the remuneration of officers and other employees appointed by a
Regional Rural Bank shall be such as may be determined by the Central Government,
and, in determining such remuneration, the Central Government shall have due regard to

the salary structure of the employees of the State Government and the local authorities of
comparable level and status in the notified area.
Notwithstanding anything contained in the Industrial Disputes Act, 1947, or any other
law for the time being in force, no award, judgment, decree, decision or order of any
industrial tribunal, court or other authority, made before the commencement of this Act,
shall apply to the terms and conditions in relation to the persons appointed by a Regional
Rural Bank.
The officers and other employees of a Regional Rural Bank shall exercise such powers
and perform such duties as may be entrusted or delegated to them by the Board.
Business which a Regional Rural Bank may transact:-

Every Regional Rural Bank shall carry on and transact the business of banking as defined
in clause (b) of section 5 of the Banking Regulation Act, 1949, and may engage in one or
more forms of business specified in sub-section (1) of section 6 of that Act.
Without prejudice to the generality of the provisions of sub-section (1), every Regional
Rural Bank may, in particular, undertake the following types of business, namely: The granting of loans and advances, particularly to small and marginal farmers and
agricultural labourers, whether individually or in groups, and to co-operative
societies, including agricultural marketing societies, agricultural processing societies,
co-operative farming societies, primary agricultural credit societies or farmers'
service societies, for agricultural purposes or agricultural operations or for other

purposes connected therewith;

The granting of loans and advances, particularly to artisans, small entrepreneurs and
persons of small means engaged in trade, commerce or industry or other productive
activities, within the notified area in relation to the Regional Rural Bank

Closure of accounts:

Every Regional Rural Bank shall cause it books to be closed and balanced as on the 31 st
day of December of each year and shall appoint with the approval of the Central

Government auditors for the audit of its accounts.

Every auditor of a Regional Rural Bank shall be a person who is qualified to act as an
auditor of a company under section 226 of the Companies Act, 1956 (1 of 1956), and
shall receive such remuneration as the Regional Rural Bank may fix with the approval of

the Central Government.

Every auditor shall be supplied with a copy of the annual balance-sheet and profit and
loss account of the Regional Rural Bank, and a list of all books kept by the Regional
Rural Bank, and it shall be the duty of the auditor to examine the balance-sheet and
vouchers relating thereto, and, in the performance of his duties, the auditor
a. Shall have, at all reasonable times, access to the books, accounts and other
documents of the Regional Rural Bank;
b. May, at the expense of the Regional Rural Bank, employ accountants or other
persons to assist him in investigating such accounts; and
c. May, in relation to such accounts, examine the Chairman or any officer or
employee of the Regional Rural Bank.

Every auditor of a Regional Rural Bank shall make a report to that bank upon the annual
balance-sheet and accounts and in every such report shall state:a. Whether, in his opinion, the balance-sheet is a full and fair balance-sheet containing
all necessary particulars and is properly drawn up so as to exhibit a true and fair view
of the affairs of the Regional Rural Bank, and, in case he had called for any
explanation or information, whether it has been given and whether it is satisfactory;
b. Whether or not, the transactions of the Regional Rural Bank, which have come to his
notice, have been within the powers of that bank;

c. Whether or not, the returns received from the offices and branches of the Regional
Rural Bank have been found adequate for the purpose of his audit;
d. Whether the profit and loss account shows a true balance of profit or loss for the
period covered by such accounts; and
e. Any other matter which he considers should be brought to the notice of the Regional
Rural Bank.
Annual report to be furnished the shareholders:Every Regional Rural Bank shall, within sixty days from the date of closure of its
accounting year, send to each of its shareholders a report as to its working and activities
during the accounting year immediately preceding together with a copy of its balancesheet, profit and loss account and the auditor's report in relation to the accounts of the said
accounting year.
Disposal of profits:-

After making provisions for bad and doubtful debts, depreciation in assets, contributions
to staff and superannuation funds and all other matters for which provision is, under law,
necessary or which are usually provided for by banking companies, a Regional Rural
Bank may, out of its net profits, declare a dividend.
Interest-tax not payable:Notwithstanding anything contained in the Interest-tax Act, 1974 (45 of 1974), no
Regional Rural Bank shall be liable to pay any tax under that Act.
Power of Central Government to give directions:-

(1)

A Regional Rural Bank shall, in the discharge of its functions, be guided by such
directions in regard to matters of policy involving public interest as the Central
Government may, after consultation with the Reserve Bank, give.

(2)

If any question arises as to whether any such direction relates to a matter of policy
involving public interest, the decision of the Central Government thereon shall be
final.

Functions:Every RRB is authorized to carry on to transact the business of banking as defined in the
Banking Regulation Act and may also engage in other business specified in Section 6 (1) of the
said Act. In particular a RRB is required to undertake the business of
Granting loans and advances to small and marginal farmers and agricultural
laborers whether individually or in groups, and to cooperative societies including
agricultural marketing societies agricultural processing societies cooperative farming
societies primary agricultural credit societies or farmers service societies primary
agricultural purposes or agricultural operations or other related purposes, and
Granting loans and advances to artisans small entrepreneurs and persons of small means
engaged in trade commerce industry or other productive activities within its area of
operation.
The Reserve Bank of India has brought RRBs under the ambit of priority sector lending
on par with the commercial banks. They have to ensure that forty percent of their

advances are accounted for the priority sector. Within the 40% priority target, 25% should
go to weaker section or 10% of their total advances to go to weaker section.
The State Bank of India is one of the major commercial banks having regional rural banks. There
are 30 Regional Rural Banks in India, under the State Bank of India and it is spread in 13 states
across India. The number of branches the SBI Regional Rural Banks is more than 2000. Several
other banks, apart from the State Bank of India also functions as the promoter of rural
development in India.
Objectives of regional rural banks
The importance of the rural banking in the economic development of a country cannot be
overlooked. As Gandhiji said Real India lies in Villages, and village economy is the backbone
of Indian economy. Without the upliftment of the rural economy as well as the rural people of
our country, the objectives of economic planning cannot be achieved.
In fact, the real growth of Indian economy lied in the freeing of rural masses from acute poverty,
unemployment, and socio-economic backwardness.

RRBs established with the explicit objective of: Bridging the credit gap in rural areas

Check the outflow of rural deposits to urban areas

Reduce regional imbalances and increase rural employment generation

The main objective of setting up the RRB is to provide credit and other facilities especially to
the small and marginal farmers agricultural labourers artisans and small entrepreneurs in rural
areas. Each RRB will operate within the local limits specified by notification. If necessary a
RRB will also establish branches or agencies at places notified by the Government. Each RRB is
sponsored by a public sector bank which provides assistance in several ways viz., subscription
to its share capital provision of such managerial and financial assistance as may be mutually
agreed upon and helps the recruitment and training of personnel during the initial period of its
functioning.
The Performance of Regional Rural Banks (RRBs) in India: Has Past Anything to Suggest
for Future?

Research Officer in the Department of Economic Analysis and Policy, Reserve Bank of
India and presently working from the Patna office of the Bank. The views expressed here
are of the author and not necessarily of the institution to which he belongs.

Discussions with Shri S. S. Mishra have been enlightening for the author. The author
would like to thank an anonymous referee for valuable suggestions. The Author gratefully
acknowledges the encouragement and inspirations of Dr. Narendra Jadhav, Dr. R. K.
Pattnaik and Shri S. Ganesh. Biswa, Swarup Misra

Since their inception, regional rural banks (RRBs) have taken deep roots and have
become a sort of inseparable part of the rural credit structure in India. The financial
viability of the RRBs has, however, been a matter of concern since the 1980s, just five

years after their existence. A number of committees have gone into the issue of their
financial viability and possible restructuring. This study follows a deductive approach.

First the extent of the problem of the loss making RRBs has been studied to analyze if the
problem is confined to some particular sponsor banks or States. Subsequently, an attempt
is made to enquire as to factors that influence the performance of the RRBs and the roleplayed by the sponsor banks. The empirical analysis has been couched in terms of profit
and loss making RRBs for a reasonably long (10-year) period to draw robust policy
inferences.

Significant improvement in Regional Rural Banks Performance:The establishment of the Regional Rural Banks (RRBs) was initiated in 1975 under the
provisions of the ordinance promulgated on 26.9.1975 and thereafter Section 3(1) of the RRB
Act, 1976. The issued capital of RRBs is shared by Central Government, sponsor bank and
the State Government in the proportion of 50%, 35% and 15% respectively. The area of
operation of a majority of the RRBs is limited to a notified area comprising a few districts in a
State. In the year 2005, a process was initiated for the structural consolidation of RRBs
sponsored by the same bank within a State. As a result of amalgamation, 196 RRBs were
reduced to 133 by way of amalgamation as on 31.3.2006 and have been further reduced to
102, as on date. The amalgamated RRBs will reap benefits of staff rationalizaton, increased
quantum of advances and investments on the increased capital base and the benefit of larger
resources and economies of scale. RRBs are showing considerable improvement in their
performance and their total business has been increased from Rs. 82463.94 crore in the year

2003-04 to Rs. 111041.40 crore in 2005-06. The Agricultural loans has increased from Rs.
7174.97 crore in the year 2003-04 to Rs. 15298.88 crore in the year 2005-06 and has thus
more than doubled during the period of 3 years. Gross NPA has also reduced from 12.63% in
the year 2003-04 to 7.28% in the year 2005-06, while Net NPA has reduced from 8.55% in the
year 2003-04 to 3.92% in the year 2005-06 during this period.
Financial Institution & Services: RRBs are oriented towards meeting the needs of the weaker sections of the rural
population consisting of: Small and marginal farmers,
Agricultural labourers,
Artisans,
Small entrepreneurs
Mobilize deposits from rural households.

The institution of Regional Rural Banks was created to meet the excess demand for
institutional credit in the rural areas, particularly among the economically and socially
marginalized sections.
RRBs are expected to make credit available to rural households besides inspiring
carefulness.
To take the banking services to the doorstep of rural masses, particularly in hitherto
unbanked rural areas.
To make available institutional credit to the weaker sections of the society who had by far
little or no access to cheaper loans and had perforce been depending on the private money
lenders.
To mobilize rural savings and channelize them for supporting productive activities in
rural areas.
To create a supplementary channel for the flow the central money market to the rural
areas through refinances

 To generate employment opportunities in rural areas and bringing down the cost of
providing credit to rural areas.
With these objectives in mind, knowledge of the local language by the staff is an
important qualification to make the bank accessible to the people.

Evaluation of RRBs:The Committee constituted by the RBI in June 1977 to valuate the performance of RRBs
concluded that with some modifications in their organisation and structure. The Committee to
Review Arrangements for Institutional Credit for Agriculture and Rural Development which inter
alia examined the role of RRBs in the rural development work, suggested the following:
Preference for opening bank branches than commercial banks
The eligible business of commercial banks rural branches may be transferred to RRBs.
The losses in initial years of RRBs may be met by shareholders and equity capital should
also be raised.
The various facilities provided by sponsor banks should continue for 10 yrs in each case.
Concessionary refinance by RBI should be continued

The control, regulation, and promotional responsibilities should be transferred from the GOI to
RBI or NABARD.

RBI assistance :

With a view to facilitate RRBs operations, the RBI gave RRBs direct access to refinance

assistance at a concessional rate of three per cent below the bank rate.

Allowed to maintain a lower level of SLR than commercial banks.

Allowed to pay half per cent more interest on all deposits except those of three years and

above.

Sponsor banks IDBI, NABARD, SIDBI, and other FIs are statutorily required under the

RRBs Act to provide managerial and financial assistance to RRBs

Corporate & social responsibility:We believe our first duty is to operate with integrity at all times so we can ensure the present and
future well-being of our stakeholders. We strive to have a positive economic, environmental and
social impact, providing responsible leadership in the marketplace, the workplace and in the
communities where we live and work.
RBC's vision is "always earning the right to be our clients' first choice." In order to accomplish
this, we are committed to doing better for our clients, our investors, our employees and our
communities, through a focused approach to corporate responsibility.
Our priorities for corporate responsibility cover five areas:
1) Economic Impact

Provide strong returns to shareholders

Pay fair share of taxes
Create employment
Support small business and community economic development
Foster innovation and entrepreneurship
Purchase goods and services responsibility

2) Marketplace
Provide access to basic banking services
Develop and provide products responsibility
Protect, educate and listen to consumers
3) Workplace

 Maintain progressive workplace programs and practices

Respect diversity and promote inclusion
Provide competitive compensation and total rewards, and enable growth through
training and development opportunities
Foster a culture of employee engagement
4) Environment
Reduce the intensity of our environmental footprint
Promote environmentally responsible business activities
Offer environmental products and services
5) Community
Provide donations with a lasting social impact
Sponsor key community initiatives
Enable employees to contribute
RBC is committed to making a lasting social impact through inspired, responsible giving and by
building strong partnerships with the charitable sector. Our approach is to support endeavours
that empower organizations to make a difference and inspire others.

Reform process of RRBs:-

RRBs started their development process on 2nd October 1975 with the formation of a single
bank (Prathama Grameen Bank). As on 31 March 2006, there were 133 RRBs (post-merger)
covering 525 districts with a network of 14,494 branches. RRBs were originally conceived as
low cost institutions having a rural ethos, local feel and pro poor focus. However, within a very
short time, most banks were making losses. When the reform process in the banking sector was
initiated, RRBs were taken up for a close look. The GoI in consultation with RBI and NABARD

started the reform process thru a comprehensive package for RRBs including cleansing their
balance sheets and recapitalising them. Extant lending restrictions were removed and space and
variety available for investment of their surplus funds was expanded.
Simultaneously, a number of human resource development and Organisational Development
Initiatives (ODI) were taken up by NABARD with funding support of the Swiss Development
Corporation (SDC) and with the tools of training and exposure visits, ODI, technology support,
computerization and use of IT, system development, etc. for business development and
productivity improvement. By end March 2005, there was a remarkable improvement in the
financial performance of RRBs as compared to the position prevailing in 1994-95. The number
of banks reporting profits went up to 166 of the 196 RRBs. As on 31 March 2006, of the total
133 RRBs (post merger), 111 posted profits and 75 of these RRBs were sustainably viable
organisations having no accumulated losses as also posting current profits.
The amalgamated RRBs were expected to provide better customer service due to better
infrastructure, computerization of branches, pooling of experienced work force, common
publicity / marketing efforts, etc. and also derive the benefits of a large area of operation,
enhanced credit exposure limits and more diverse banking activities. As a result of the
amalgamation, the number of RRBs was reduced from 196 to 133 as on 31 March, 2006 and to
96 as on 30 April 2007. Thus, 59 under the amalgamation process, 145 RRBs have been
amalgamated to form 45 new RRBs.

District Coverage:RRBs covered 525 out of 605 districts as on 31 March 2006. After amalgamation, RRBs have
become quite large covering most parts of the State in many cases. Assam Gramin Vikas Bank,

an amalgamated RRB, covers 25 districts, the highest in the country, while five other
amalgamated RRBs cover 10 or more districts each. However, 40 RRBs covered two districts
and 16 RRBs covered a single district each in 2005-06. Increased coverage of districts by RRBs
makes them an important segment of the Rural Financial Institutions (RFI) for financial
inclusion.
Branch Network:-

The number of branches of RRBs increased to 14,494 as on 31 March 2006 from 13,920
branches as on 31 March 1989. The network of the 45 amalgamated RRBs (as on April 2007)
was quite large and diverse varying from 85 to 680 branches. The Uttar Bihar KGB, an
amalgamated RRB, has 680 branches, followed by Baroda Eastern UPGB with 539 branches.
The branch network of stand-alone RRBs varied between 8 and 242 as on 31 March 2006.

Key Performance Indicators:Reforms introduced in RRBs by GoI in consultation with RBI and NABARD have yielded
positive results in respect of key performance indicators, as indicated under:
Key Performance Indicators : RRBs:Amount Rs. Crore

Sr. No.
1
2
3
4
5
6
7

Indicators
NO. of RRBs
No. of Districts Covered
No. of Branches
No. of Staff
Owned Funds
Deposits
Borrowings

31.3.2005
196
518
14446
69249
5438
56350
4595

31.3.2006
196
523
14484
68912
6181
62143
5524

31.3.2007
133
525
14494
68629
6647
71329
7303

8
9
10
11
12

Investment
Loans Outstandings
Credit Deposit (CD) Ratio
Loans Issued
No. of RRBs Having Accumulated

Losses
13
Accumulated Losses
14
No. Of RRBs in Profit
15
Net NPA (%)
16
Recovery (%) (as on 30 June)
17
Per Branch Productivity
18
Per Staff Productivity
The following trends can be highlighted :

36135
26114
46%
15579
90

36761
32870
53%
21082
83

41182
39713
56%
25427
58

2725
163
8.55%
73%
5.71
1.19

2715
166
4.84%
78%
6.56
1.38

2637
111
3.99%
80%
7.66
1.62

111 RRBs out of total 133 registered profit in the year 2005-06. 60
CD Ratio has been increasing from 46% on 31 March 2004 to 53% on 31 March 2005
and further to 56% on 31 March 2006.
Recovery percentage has been improving from 73% during 2003-04 to 80% during 200506.
Consequently, net NPAs have declined from 8.55% on 31 March 2004 to 3.99% on 31
March 2006.
Loans disbursement registered an impressive 35% annual growth in 2004-05 and 21% in
2005-06.
Per branch productivity has increased from Rs. 5.71 crore on 31 March 2004 to Rs. 7.66
crore on 31 March 2006.
Per staff productivity has increased from Rs.1.19 crore on 31 March 2004 to Rs.1.62
crore on 31 March 2006.
There has been a decline in the total number of staff.

Performance under Doubling of Agriculture Credit : RRBs

More importantly, the performance of RRBs under GoI's initiative on doubling of agriculture
credit in three years (from base year 2003-04) and greater coverage of small and marginal

farmers have been impressive. They disbursed agriculture loans of the order of Rs. 12,404 crore
during 2004-05 registering a phenomenal annual growth of 64% against the targeted 30%.
During 2005-06, agriculture credit flow stood at Rs. 15,223 crore with a growth of 23%. Thus,
RRBs have achieved the target of doubling of agriculture credit in 2 years. RRBs financed 18.58
lakh new farmers in 2004-05 and another 17.03 lakh new farmers in 2005-06.
RRB's Potential Role in Financial Inclusion

Post-merger RRBs represent a powerful instrument for financial inclusion. Their outreach vis-vis other scheduled commercial banks particularly in regions and across population groups
facing the brunt of financial exclusion is impressive, as observed from an analysis of Basic
Statistical Returns of the RBI and indicated in the following paragraphs. With merger infusing
the much needed financial strength in RRBs coupled with the local feel and familiarity they
command, RRBs are in a unique position to play a decisive role in financial inclusion.

In rural areas, RRBs account for a substantial 37% of total offices of all scheduled commercial
banks. In semi-urban areas, their share comes to 15%. It goes without saying that exclusion is
more severe in rural areas.
Offices of Scheduled Commercial Banks
Population Group and Bank Group-wise (March 2005)

Rural Offices

Semi urban

Urban/Metro

Offices

Offices

Bank Group
No.

% to

No.

% to

No.

% to

Total

No.

% to

RRBs
SCBs Other

11824
20143

Total
37
63

than RRBs
Total

31967

100

2284
13335

Total
15
85

15619

100

537
21846

Total
2
98

14645
55324

Total
21
79

22383

100

69969

100

Manpower Deployment:91% of the total workforce in RRBs is posted in rural and semi-urban areas as compared to 38%
for other scheduled commercial banks (table below). Even in absolute terms, out of a total
workforce of 179,423 deployed by all scheduled commercial banks in rural areas, RRBs share is
25% (45,062). This is significant considering that at all India level, manpower of RRBs
constitute only 7% of the total manpower of all scheduled commercial banks.

Distribution of Employees of Scheduled Commercial Banks (March 2005)

Bank Group

Total

% of employees

% of employees

% of employees

Employees

posted in rural

posted in semiurban

posted in urban /

RRBs
SCBs Other

65599
834834

branches
69
16

branches
22
22

metro branches
9
62

than RRBs
Total

900433

20

22

58

Savings Mobilisation:At all India level, RRBs account for 12% of all deposit accounts of scheduled commercial banks
and a meagre 3.5% of deposit amount. However, in rural areas, RRBs share in deposit accounts
is a significant 31% and that in deposit amount 19%. This shows that the average deposit amount

is lower in RRBs than other commercial banks, thereby implying RRBs' better reach to small
depositors.

Deposits of Rural Branches of Scheduled Commercial Banks - Bank Group-wise

(March 2005)

Bank Group
RRBs
SCBs Other than RRBs
Total

No. of Accounts
No. (000)
43540
98368
141908

% to Total
31
69
100

Deposit Amount
Amount(Rs. Cr.) % to Total
40957
19
172147
81
213104
100

RRBs as Self Help Promotion Institutions (SHPI):-

RRBs have not only provided financial services to the SHG-Bank Linkage Programme, but have
also played a significant role as SHPIs. As many as 104 RRBs (31 March 2006) are also
functioning as SHPIs with grant assistance from NABARD. Non-availability of good NGOs is a
matter of concern especially in North-Eastern, Central and Eastern Regions. RRBs can play a
vital role as SHPIs in such areas.
The foregoing paragraphs conclusively indicate that RRBs are well positioned to play a major
role in financial inclusion particularly in areas / regions with high rates of financial exclusion.
RRBs were originally created to cater to neglected sections / areas as they were expected to have
sound financial management combined with local feel and familiarity. With the amalgamation of

RRBs, they have acquired the critical mass in terms of financial strength to widen and deepen
their outreach. With the requisite strength having been developed, RRBs are the best suited
vehicles to widen and deepen the process of financial inclusion. However, utmost care must be
taken to ensure that in the process of fulfilling the socio-economic objective of financial
inclusion, RRBs' do not again fall into the vicious circle of deteriorating financial performance
and deviation from their mandate. RRBs may be provided adequate promotional and
developmental assistance to contribute substantially to financial inclusion in a way that the
business generated out of inclusion efforts add positively to their performance.

Apart from SBI, there are many other banks which function for the development of the
rural areas in India. These banks are listed below:-

Andhra Pradesh

Andhra Pradesh Grameena Vikas Bank

Andhra Pragathi Grameena Bank

Deccan Grameena Bank

Chaitanya Godavari Grameena Bank

Saptagiri Grameena Bank

Bihar

Madhya Bihar Gramin Bank

Bihar Kshetriya Gramin Bank

Uttar Bihar Kshetriya Gramin Bank

Kosi Kshetriya Gramin Bank

Samastipur Kshetriya Gramin Bank

Chhattisgarh

Chhattisgarh Gramin Bank

Surguja Kshetriya Gramin Bank

Durg-Rajnandgaon Gramin Bank

Haryana

Harayana Gramin Bank

Gurgaon Gramin Bank

Jammu & Kashmir

Jammu Rural Bank

Ellaquai Dehati Bank

Kamraz Rural Bank

Assam

Assam Gramin Vikash Bank

Langpi Dehangi Rural Bank

Jharkhand

Jharkhand Gramin Bank

Vananchal Gramin Bank

Madhya Pradesh

Narmada Malwa Gramin Bank

Satpura Kshetriya Gramin Bank

Madhya Bharath Gramin Bank

Chambal-Gwalior Kshetriya Gramin Bank

Rewa-Sidhi Gramin Bank

Sharda Gramin Bank

Ratlam- Mandsaur Kshetriya Gramin Bank

Vidisha Bhopal Kshetriya Gramin Bank

Mahakaushal Kshetriya Gramin Bank

Jhabua Dhar Kshetriya Gramin Bank

Gujarat

Dena Gujarat Gramin Bank

Baroda Gujarat Gramin Bank

Saurashtra Gramin Bank

Himachal Pradesh

Himachal Gramin Bank

Parvatiya Gramin Bank

Punjab

Punjab Gramin Bank

Faridkot-Bhatinda Kshetriya Gramin Bank

Malwa Gramin Bank

Kerala

Narmada Malwa Gramin Bank

North Malabar Gramin Bank

Tamil Nadu

Pandyan Grama Bank

Pallavan Grama Bank

Maharashtra

Marathwada Gramin Bank

Aurangabad -Jalna Gramin Bank

Wainganga Kshetriya Gramin Bank

Vidharbha Kshetriya Gramin Bank

Solapur Gramin Bank

Thane Gramin Bank

Ratnagiri-Sindhudurg Gramin Bank

Karnataka

Karnataka Vikas Grameena Bank

Pragathi Gramin Bank

Cauvery Kalpatharu Grameena Bank

Krishna Grameena Bank

Chikmagalur-Kodagu Grameena Bank

Visveshvaraya Gramin Bank

Rajasthan

Baroda Rajasthan Gramin Bank

Marwar Ganganagar Bikaner Gramin Bank

Rajasthan Gramin Bank

Jaipur Thar Gramin Bank

Hodoti Kshetriya Gramin Bank

Mewar Anchalik Gramin Bank

Orissa

Kalinga Gramya Bank

Utkal Gramya Bank

Baitarani Gramya Bank

Neelachal Gramya Bank

Rushikulya Gramya Bank

West Bengal

Bangiya Gramin Vikash Bank

Paschim Banga Gramin Bank

Uttar Banga Kshetriya Gramin Bank

Meghalaya

Ka Bank Nogkyndong Ri Khasi- Jaintia

Arunachal Pradesh

Arunachal Pradesh Rural Bank

Manipur

Manipur Rural Bank

Mizoram

Mizoram Rural Bank

Nagaland

Nagaland Rural Bank

Tripura

Tripura Gramin Bank

Uttar Pradesh

Purvanchal Gramin Bank

Kashi Gomti Samyut Gramin Bank

Uttar Pradesh Gramin Bank

Shreyas Gramin Bank

Lucknow Kshetriya Gramin Bank

Ballia Kshetriya Gramin Bank

Triveni Kshetriya Gramin Bank

Aryavart Gramin Bank

Kisan Gramin Bank

Kshetriya Kisan Gramin Bank

Etawah Kshetriya Gramin Bank

Rani Laxmi Bai Kshetriya Gramin Bank

Baroda Western Uttar Pradesh Gramin Bank

Devipatan Kshetriya Gramin Bank

Prathama Bank

Baroda Eastern Uttar Pradesh Gramin Bank

Uttaranchal

Uttaranchal Gramin Bank

Nainital Almora Kshetriya Gramin Bank

Banking facilities to be provided by March 2012 to habitations having population in excess

of 2000
In July, 2009, a total of 129 un-banked blocks were identified in the country. As a result of the
concerted efforts made by the Government, Reserve Bank of India (RBI) and the Banks in
providing banking facilities in the un-banked blocks, the number of such blocks has come down
to 93 in February, 2010. Low population density, inhospitable terrain, law and order problems
and non-availability of the basic infrastructure have been indicated as the main impediments in
providing banking facilities in these areas. The Government is monitoring the progress made in
this regard on an ongoing basis.

To reach the benefits of banking services to the hinterland it has been proposed to provide
appropriate banking facilities to habitations having population in excess of 2000 by March,
2012. These services will be provided by Banks using the Business Correspondent Model and
other models with appropriate technology back-up, to cover around 60,000 habitations.
To extend the reach of banking to rural areas having a low penetration of bank branches, the RBI
has liberalized the policy of branch licensing and permitted domestic scheduled commercial
banks (other than Regional Rural Banks) to open branches in Tier 3 to Tier 6 centres (with
population upto 49,999 as per Census 2001) without having the need to take permission from
RBI in each case. The detailed RBI circular is available at its website www.rbi.org.in.
During the current financial year, the State Bank of India (SBI), the State Level Bankers
Committee (SLBC) Convenor for Uttarakhand has reported that it has already opened 16 new
branches and has received approval for opening another 18 new branches in Uttarakhand. As per
the branch expansion programme of the Regional Rural Banks in Uttarakhand, the Uttaranchal
Gramin Bank is to open 24 branches and the Nainital Almora Kshetriya Gramin Bank is to open
4 branches in the next two years in the State of Uttarakhand.

Implementation of RBI initiatives for financial inclusion:All the recent circulars relating to financial inclusion, viz., no frills accounts, GCC, One Time
Settlement (OTS) for loans up to Rs. 25,000, use of intermediaries, etc., should be implemented
by RRBs.
Local Area Banks:-

The Finance Minister, in his August 1996 Budget, announced the concept of Local Area Banks
(LAB) and following this, the RBI issued guidelines and sought applications for setting up
LABs. Only 6 LABs were licensed to operate by RBI, of which 4 are currently functioning.
Though the overall performance indicators of functioning LABs appear to be healthy, there have
been a few instances of LABs having to close down. Keeping in view the inherent potential of
LABs, RBI may consider revisiting the same and keep the option open to allow new LABs to
come into operation, especially in districts / regions manifesting high levels of exclusion without
compromising on regulatory prescriptions. LABs can integrate well with local financial markets
and offer a host of financial services including savings, credit, remittances, insurance, etc.
Role of Regional Rural Banks in Economic Development:The importance of the rural banking in the economic development of a country cannot be
overlooked. As Gandhiji said Real India lies in villages, and village economy is the backbone
of Indian economy. Without the upliftment of the rural economy as well as the rural people of
our country, the objectives of economic planning cannot be achieved. In fact, the real growth of
Indian economy lied in the emancipation of rural masses from acute poverty, unemployment, and
socio-economic backwardness. Keeping this end in view, various important plans and
programmes of rural development have been conceived and implemented by the government of
India since the commencement of first five-year plan from 1951-56. But an appraisal of the
achievement of these programmes clearly reveals that much programmes failed to achieve the
desired objectives due to the backward economic condition and lack of adequate finance to the
poor people in the rural areas. Hence, bank and other financial institutions are of vital importance
for development of rural economy of a country. The present study is a modest attempt to make an
appraisal of the credit needs of the rural people and the way Regional Rural Bank, i.e., Arunachal

Pradesh Rural Bank, has been extending its service to meet the same in the state of Arunachal
Pradesh. It deals with the performance evaluation of Arunachal Pradesh. Rural Bank (APRB) for
the economic development of the state.
The effect of RRBs on economic development:-

111 RRBs out of total 133 registered profit in the year 2005-06.
CD Ratio has been increasing from 46% on 31 March 2004 to 53% on 31 March 2005

and further to 56% on 31 March 2006.

Recovery percentage has been improving from 73% during 2003-04 to 80% during 2005-

06.
Net NPAs have declined from 8.55% on 31 March 2004 to 3.99% on 31 March 2006.
Loans disbursement registered an impressive 35% annual growth in 2004-05 and 21% in

2005-06.
Per branch productivity has increased from Rs. 5.71 crore on 31 March 2004 to Rs. 7.66

crore on 31 March 2006.

Per staff productivity has increased from Rs.1.19 crore on 31 March 2004 to Rs.1.62
crore on 31 March 2006.

OBJECTIVE

To find out the effectiveness of induction and orientation of RRBs in India.

To know the role of Regional Rural Banks in economic development.

The purpose of this study has been to determine whether the induction and orientation
progamme is used for employee development and whether it is emphasized as an

important part of the industry process. Also whether the induction and orientation
progamme helps in increasing companys profitability.

IMPORTANCE
The importance of a project report is following
The study will help to know that what additional features & what facilities should be
increase.

 Customer is satisfied with the product and services provided by companies or he is

dissatisfied.
It helps in identify reason behind dissatisfactions.
The importance of study is that it is helpful to make future policy of the company.
It is important to create a new plan for products & services in future with unique quality
& facilities that will be preferred by the customers.
To know the factor behind purchase of loreal and dove products.
To know the recent technologies and growth rate of loreal and dove products in Ghazipur.

SCOPE
The purpose of this study to know that the government is seriously to address the crisis in rural
banking, it must reaffirm the commitment of the state to the policy of social and development
banking, and reaffirm the part played by the credit system in redistribution and poverty
alleviation. Commercial banks, Regional Rural Banks and cooperatives must lead rural credit
revival, which is too serious and large-scale a task to be left merely to self help groups or NGOcontrolled private-sector micro-credit organizations. The geographical and functional reach of

public sector banking must be restored and extended, differential interest policies reinstated, and
special loans-cum-subsidy schemes reintroduced on a large scale for all landless and poor and
middle peasant households, scheduled caste and tribe households and other vulnerable sections
of the rural population. Priority sector norms must be enforced, and, instead of an alternative
such as investment in RIDF bonds, penalties must be imposed on any failure of banks to meet
these public-interest targets.

Chapter -2
Research Methodology

Research Methodology
`Research`

Research is a purposeful investigation. It is a scientific & systematic search for knowledge &
intimation on a specific topic research is use full & research objective can be achieved if it is
done in propose process

Methodology

The world methodology spell the meaning itself if the method used by the researches in
obtaining information. The data (information can be collected from primary sources & secondary
sources.) By primary data we mean data collected by researches himself for the first time to
collaborate the data which has previously not been used is known as primary data By secondary
data we mean the data collected from various published matters, a Magazine newspapers status
of previous research report etc. In other words we can say that the data which as already been
used your different purpose by different people is known as secondary Primary data can be
collected through questionnaire and personal interview as for as concern my research is limited
to dealers personality Secondary data are collected from the various books journals new
spapereditional expert suggestions web sites & internet & etc. Research is a common language
refers to a search of knowledge. Research is scientific & systematic search for pertinent
information on a specific topic, infect research is an art of scientific investigation. Research
Methodology is a scientific way to solve research problem. It may be understood as a science of
studying how research is doing scientifically. In it we study various steps that are generally
adopted by researchers in studying their research problem. It is necessary for researchers to know
not only know research method techniques

The scope of Research Methodology is wider than that of research methods.

The research problem consists of series of closely related activities. At times, the first step
determines the native of the last step to be undertaken. Why a research has been defined, what
data has been collected and what a particular methods have been adopted and a host of similar

other questions are usually answered when we talk of research methodology concerning a
research problem or study. The project is a study where focus is on the following points:
RESEARCH DESIGNA research design is defined, as the specification of methods and procedures for acquiring the
Information needed. It is a plant or organizing framework for doing the study and collecting the
data. Designing a research plan requires decisions all the data sources, research approaches,
Research instruments, sampling plan and contact methods.
Research design is mainly of following types: 1

Exploratory research.

Descriptive studies

Experimental

EXPLORATORY RESEARCH
The major purposes of exploratory studies are the identification of problems, the more precise
Formulation of problems and the formulations of new alternative courses of action. The design of
exploratory studies is characterized by a great amount of flexibility and ad-hoc veracity.
DESCRIPTIVE STUDIES
Descriptive research in contrast to exploratory research is marked by the prior formulation of
specific research

Questions. The investigator already knows a substantial amount about the

research problem. Perhaps as a Result of an exploratory study, before the project is initiated.
Descriptive research is also characterized by a Preplanned and structured design.
EXPERIMENTAL DESIGN:-

A casual design investigates the cause and effect relationships between two or more variables.
The hypothesis is tested and the experiment is done. There are following types of casual designs:

B)

After only design

II

Before after design

III

Before after with control group design

IV

Four groups, six studies design

After only with control group design.

VI

Consumer panel design

VII

Exposit facto design

DATA COLLECTION METHOD

PRIMARY

SECONDARY

Direct personal Interview

Indirect personal Interview

Information from correspondents

Published Sources

Govt. publication

Unpublished Sources

Mailed questionnaire

Report Committees & Commissions

Question filled by enumerators.

Private Publication

Research institute

PRIMARY DATA
These data are collected first time as original data. The data is recorded as observed or
encountered. Essentially they are raw materials. They may be combined, totaled but they have
not extensively been statistically processed. For example, data obtained by the peoples.

SECONDARY DATA
Following are the main sources of secondary data:

Official Publications.

Publications Relating to Trade:

Journal/ Newspapers etc.:

Data Collected by Industry Associations:

Unpublished Data: Data may be obtained from several companies, organizations,

working in the same areas like magazines.

Period of Study: This study has been carried out for a maximum period of 4 weeks.
Area of study: The study is exclusively done in the area of marketing. It is a process requiring
care, sophistication, experience, business judgment, and imagination for which there can be no
mechanical substitutes.
Sampling Design: The convenience sampling is done because any probability sampling
procedure would require detailed information about the universe, which is not easily available
further, it being an exploratory research.
Sample Procedure: In this study judgmental sampling procedure is used. Judgmental sampling
is preferred because of some limitation and the complexity of the random sampling. Area
sampling is used in combination with convenience sampling so as to collect the data from
different regions of the city and to increase reliability.
Sampling Size: The sampling size of the study is 100 users.

Method of the Sampling

Probability Sampling
It is also known as random sampling. Here, every item of the universe has an equal chance or
probability of being chosen for sample.
Probability sampling may be taken inform of:

Simple Random Sampling A simple random sample gives each member of the population
an equal chance of being chosen. It is not a haphazard sample as some people think! One way
of achieving a simple random sample is to number each element in the sampling frame and then
use random numbers to select the required sample. Random numbers can be obtained using your
calculator, a spreadsheet, printed tables of random numbers, or by the more traditional methods
of drawing slips of paper from a hat, tossing coins or rolling dice.

Systematic Random Sampling

This is random sampling with a system! From the sampling frame, a starting point is chosen at
random, and thereafter at regular intervals.
Stratified Random Sampling
With stratified random sampling, the population is first divided into a number of parts or 'strata'
according to some characteristic, chosen to be related to the major variables being studied. For
this survey, the variable of interest is the citizen's attitude to the redevelopment scheme, and the
stratification factor will be the
values of the respondents' homes. This factor was chosen because it seems reasonable to suppose
that it will be related to people's attitudes.
Cluster and area Sampling
Cluster sampling is a sampling technique used when "natural" groupings are evident in a
statistical population. It is often used in marketing research. In this technique, the total
population is divided into these groups (or clusters) and a sample of the groups is selected. Then
the required information is collected from the elements within each selected group. This may be

done for every element in these groups or a sub sample of elements may be selected within each
of these groups.
Non Probability Sampling
It is also known as deliberate or purposive or judge mental sampling. In this type of sampling,
every item in the universe does not have an equal, chance of being included in a sample.

It is of following type:

Convenience Sampling

A convenience sample chooses the individuals that are easiest to reach or sampling that is done
easy. Convenience sampling does not represent the entire population so it is considered bias.

Quota Sampling

In quota sampling the selection of the sample is made by the interviewer, who has been given
quotas to fill from specified sub-groups of the population.

Judgment Sampling

The sampling technique used here in probability > Random Sampling.

The total sample size is 100 profiles.
I have selected Probability sampling method for this research study.

Data Collection: - Data is collected from various customers through personal interaction.
Specific questionnaire is prepared for collecting data. Data is collected with more interaction and
formal discussion with different respondents and we collect data about investment pattern of
people by face to face contact with the persons from whom the information is to be obtained
(known as informants). The interviewer asks them questions pertaining to the survey and
collects the desired information.

Chapter 3
Data Analysis
&

Interpretation

Population group and bank group wise (march 2013)

Bank Group

Rural Offices

Semi-urban
Offices

Urban / Metro
Offices

Total

No

% to
Total

No

% to
Total

No

% to
Total

No

% to
Total

RRBs

11824

37

2284

15

537

02

14645

21

SCBs other than

RRBs

20143

63

13335

85

21846

98

55324

79

Total

31967

100

15619

100

22383

100

69969

100

98%
100%
85%

90%
80%
63%

70%
60%

RRBs
S CBs other than RRBs

50%
37%
40%
30%
15%

20%
10%

2%

0%
Rural Offices

S emi-urban Offices

Urban / Metro Offices

Analysis
After the research the researcher found that rural officer in RRBs are 37% and in SSBs other than
RRBs are 63%, Semi-urban officer in RRBs are 15% and in SSBs other than RRBs are 85%, and
Urban/Metro officer in RRBs are 2% and in SSBs other than RRBs are 98%.

Interpretation
The above analysis shows that SSBs other than RRBs are more than RRBs.

Indicator

31.03.201

31.03.201

31.03.201

No. of RRBs
No. of districts covered
No. of branches
No. of Staff
Owned funds
Deposits
Borrowings
Investments
Loans outstanding

196
518
14446
69249
5438
56350
4595
36135
26114

196
523
14484
68912
6181
62143
5524
36761
32870

133
525
14494
68629
6647
71329
7303
41182
39713

Loans ou tstan ding

In ve stm e nts
Borrowin gs
De posits
O wne d fun ds

31.03.2011
31.03.2012
31.03.2013

No. of Staff
No. of bran ch e s
No. of districts cove re d
No. of RRBs

Analysis
After the research the researcher found that RRBs are in 2011 are 196, in 2012 196 and in 2013
become 133. No. of districts covered in 2011 are 518, in 2012 523and in 2013 become 525, No.
of branches in 2011 are 14446, in 2012 144484and in 2013 become 14496. No. of Staff in 2011
are 69249, in 2012 689124and in 2013 become 68629, Owned funds in 2011 are 5438, in 2012
6181and in 2013 become 6647, Deposits in 2011 are 56350, in 2012 62143and in 2013 become
71329, Borrowings in 2011 are 4595, in 2012 5524and in 2013 become 7303, Investments in
2011 are 36135, in 2012 36761and in 2013 become 41182, and Loans outstanding 2011 are
26114, in 2012 32870and in 2013 become 39713.

Interpretation

The above analysis shows that RRB growth in 2011 to 2013.

Findings
Lack of Computerization is a problem for the RRBs in some particular areas.
RRBs provides better credit plans and facilities to its customers but it should be prepare
annual credit plans having a separate component for excluded groups, which would
integrate credit provision with promotional assistance

The study tells that the area of working of RRBs is going wide. But the strengthening
Board of Management is missing some time.
From our findings it is clear that mostly persons have availed loan from banks.

Most respondents have availed loan for horticulture and other respondents have availed
loan for agriculture.

 The study reveals that the persons are aware about new products and services offered by
bank.
Through this study it is said that Regional Rural Banks are handling customer grievance
very well.

Suggestions
RRBs should extend their services into unbanked areas and increase their credit to deposit (CD)
ratio. As on 31 March 2006, 37 RRBs had CD ratio of less than 40%, 44 RRBs between 40% and
60% and 52 RRBs above 60%. The CD ratio variations ranged from 20% to 116%. As RRBs
operate with branches in remote, interior and tribal-dominated areas, they have a special role to
play in financial inclusion. The NRFIP, details of which are specified earlier, is of high relevance
for RRBs, particularly those having CD ratio of less than 40%. The post-merger scenario of
RRBs poses a series of challenges for them and needs to be addressed. The following areas
would require attention from the point of view of financial inclusion.
Setting exclusive targets for microfinance and financial inclusion,
Providing funding support &
Providing technology support

Keeping the above in view, the following specific recommendations are made :

No further merger of RRBs:-

There is a need for policy refinement regarding further merger of RRBs. The Vyas
Committee had recommended merger of all RRBs in the same State. Currently, RRBs of
the same sponsor bank are merged at State-level. By April 2007, the number of RRBs
was reduced to 96. If sponsor banks are to have the requisite initiative to support their
RRBs fully, they would need assurance that there will be no further mergers. The
Committee is of the view that further merger of all RRBs at State-level is not required. It
may also not be desirable if there has to be a firm reinforcement of the rural orientation of
these institutions with a specific mandate on financial inclusion. The Committee,
therefore, recommends that the process of merger should not proceed beyond the level of
sponsor bank in each State.

Recapitalization of RRBs with negative Net Worth:Recapitalization of RRBs with negative net worth has to be given a serious consideration
as it would facilitate their growth, provide lenders a level of comfort and enable their
achieving standard capital adequacy ratios. As on March 2004, 98 RRBs were in need of
Rs. 3,050 crore for making the net worth positive. The position, as on 31 March 2006, is
that 40 RRBs would require Rs.1, 718 crore.

Widening network and Expanding coverage:As on 01 April 2007, RRBs were covering 535 districts. They may be directed to cover
all unbanked areas in these districts, taking the village as a unit, either by opening a
branch (wherever feasible) or through the BF / BC model in a time bound manner. As on
01 April 2007, 87 districts in the country were not covered by RRBs and their area of
operation may be extended to cover these districts.

 Strategic microfinance plan with NABARD support:RRBs have the potential and capability to emerge as niche operators in microfinance.
They are playing a major role in the SHG - Bank Linkage Programme especially also as
SHPIs. It is significant that as an institution they have the expertise and potential to fulfill
both the requirements of SHGs - formation plus nurturing and financial service
provisions (credit plus). Their dual role has special meaning in areas which face severe
financial exclusion and which do not have a sufficient presence of well performing
NGOs. However, to upscale the programme to a level where it can really make a visible
impact, RRBs need handholding particularly in the areas of training, promotion and
development. NABARD may provide required assistance.

NABARD should prepare a strategic action plan RRB-wise, for promotion and credit
linkage of SHGs. RRBs may be asked to form, nurture and credit link at least 3,000
SHGs in all districts covered by them in North-Eastern, Eastern and Central Regions. A
Memorandum of Understanding (MoU) may be signed by RRBs with NABARD for a
period of 5 years - with NABARD providing the promotional and development assistance
out of the Financial Inclusion Promotion and Development Fund and RRBs forming,
nurturing and providing financial services to SHGs. RRBs may accomplish the task with
the support of individual rural volunteers, BFs, their staff members, etc. NABARD may
closely monitor the programme - with focus on qualitative aspects.

NRFIP for RRBs:-

The strategy recommended earlier in the Report for NRFIP for commercial banks would
be equally applicable for RRBs. The process of undertaking a survey, identification of
excluded households, dissemination of the information, setting of bank-wise / branchwise targets, etc., could be followed. RRBs will have certain handicaps in executing the
Plan. RRBs may endeavour to cover a large part of their incremental lending thru the
group mode (SHGs/JLGs) as it will enhance their outreach to the financially excluded.
Lending thru group mode would also keep NPAs at low level.

Pilot testing of BF / BC Model by RRBs

RRBs should adopt the BF and BC models as a major strategy of financial inclusion.
NABARD should extend the required support including running pilots in selected banks.
The proposal for a technology based intervention under the BF/ BC model would be
equally relevant for RRBs. However, RRBs would require some handholding in
implementing the proposal. NABARD may identify 10 RRBs across the country, giving
greater weightage to regions manifesting higher levels of financial exclusion and work in
strategic alliance with these RRBs and their sponsor banks in implementing the proposal.
The RRBs identified by NABARD for the project will require developing a core banking
software for proper integration of the technology model proposed.

Separate credit plan for excluded regions:The Committee recommends that RRBs operating in predominantly tribal areas and
having high levels of exclusion may prepare annual credit plans having a separate
component for excluded groups, which would integrate credit provision with promotional
assistance such as agricultural services and BDSs for the farm and nonfarm sectors

respectively including entrepreneurship development and formation and strengthening of

producers organisations like dairy cooperatives. Refinance and promotional support may
be provided by NABARD to RRBs on a large scale for implementation of these credit
plans.

Computerisation:With a view to facilitate the seamless integration of RRBs with the main payment system,
there is a need to provide computerisation support to them. Banks will be eligible for
support from the Financial Inclusion Funds on a matching contribution of 50% in regard
to districts other than tribal districts and 75% in case of branches located in tribal districts
under the Tribal Sub Plan.

Strengthening Boards of Management:Further, now that RRBs are being merged and are becoming large size entities, it is
necessary that their Boards of Management are strengthened and powers delegated to
them on policy and business operations, viz. introduction of new liability and credit
products, investment decisions, improving market orientation in raising and deployment
of resources, non-fund based business, career progression, transfer policy etc.

Tax Incentives:From 2006-07, RRBs are liable to pay income tax. To further strengthen the RRBs,
profits transferred to reserves could be exempted from tax till they achieve standard

capital adequacy ratios. Alternately, RRBs may be allowed tax concessions to the extent
of 40% of their profits, as per provisions under Sec. 36 (1) (viii) of the Income Tax Act.

CONCLUSION
The importance of the rural banking in the economic development of a country cannot be
overlooked. As Gandhiji said Real India lies in Villages, and village economy is the backbone
of Indian economy. Without the upliftment of the rural economy as well as the rural people of
our country, the objectives of economic planning cannot be achieved.
In fact, the real growth of Indian economy lied in the freeing of rural masses from acute poverty,
unemployment, and socio-economic backwardness.

Nevertheless, it is clear that if any government is seriously to address the crisis in rural banking,
it must reaffirm the commitment of the state to the policy of social and development banking,
and reaffirm the part played by the credit system in redistribution and poverty alleviation.
Commercial banks, Regional Rural Banks and cooperatives must lead rural credit revival, which
is too serious and large-scale a task to be left merely to self help groups or NGO-controlled
private-sector micro-credit organisations. The geographical and functional reach of public sector
banking must be restored and extended, differential interest policies reinstated, and special loanscum-subsidy schemes reintroduced on a large scale for all landless and poor and middle peasant

households, scheduled caste and tribe households and other vulnerable sections of the rural
population. Priority sector norms must be enforced, and, instead of an alternative such as
investment in RIDF bonds, penalties must be imposed on any failure of banks to meet these
public-interest targets.

Limitation
However, every care has been taken to make this report authentic in every sense. Yet, there were
a few uncomfortable factors, which might have had their influence on the final report. It is said,
nothing is perfect and if this quote is true I am sure there would be few shortcomings in this
project also. Sincere efforts have been made to eliminate due to the limitations of the study.
These are:-

The study was to be completed in a short time; the time factor put a considerable limit on
the scope and the extensiveness of the study.
There was no earlier work or reference on this area relating to IGL to confirm findings.

REFERENCES
Bagchi, Amiya Kumar (2004), Rural Credit and Systemic Risk, in Ramachandran and
Swaminathan (forthcoming 2004)
C. P. Chandrasekhar, C. P., and Ray, Sujit Kumar (2004), Financial Sector Reform and the
Transformation of Banking, in Ramachandran and Swaminathan (forthcoming 2004)
Chandrasekhar, C. P. and J. Ghosh, 2002. The Market that Failed, A Decade of Neoliberal
Economic Reforms in India. New Delhi: Leftword Books.
Chavan, P and R. Ramakumar, 2002, Micro-credit and Rural Poverty: Analysis of Empirical
Evidence, Economic and Political Weekly, 37, 10, pp 955-965.
Chavan, Pallavi and Ramakumar, R. (2004), Interest Rates on Micro-credit , in
Ramachandran and Swaminathan (forthcoming 2004)
Greeley, M, 1997. Poverty and Well Being: Problems for Poverty Reduction in Role of
Credit. In Who Needs Credit? Poverty and Finance in Bangladesh, eds Wood and Sharif, pp.
London: Zed Books.
Griffin, K., 1975. The Political Economy of Agrarian Change. London: MacMillan.
RBI (1999a), Micro Credit Special Cell, Report on Micro Credit, Central Office, Mumbai.
RBI (2001a), Some Aspects and Issues Relating to NPAs in Commercial Banks, available
at <www.rbi.org.in/rbisitemap.htm>
RBI 2004 c, Recommendations and Action Taken for Report of the Advisory Committee on
Flow of Credit to Agricultural and Related activities from the Banking System (www.rbi.og).

 www.bankersindia.com
www.basixindia.com
www.sewa.org
www.aidindia.org
Economics of Rural Banking: K. Someshwar
Rural Credit Market: Anita Gill