Money and Banking (part – II)

211. In India, Regional Rural Banks were established in the year :

(a) 1969
(b) 1975
(c) 1980
(d) 1982

Correct Answer: (b) 1975

Solution:The first Regional Rural Bank 'Prathama Grameen Bank' was set up at Moradabad (U.P.) on 2nd October, 1975. Out of five initial stage RRBs in the country, remaining four were set up at Malda (West Bangal), Gorakhpur (U.P.), Bhiwani (Haryana) and Jaipur (Rajasthan).

RRBs are banks formed in collaboration by the Central Government, State Governments, and Sponsoring Commercial Banks to give loans to rural areas.
Their mission is to fulfill the credit needs of the relatively unserved sections in rural areas: small and marginal farmers, agricultural labourers, and socio-economically weaker sections.
The RRBs mobilize financial resources from rural/semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers, and rural artisans.
Origin:
The Narasimham Committee on Rural Credit (1975) recommended the establishment of RRBs.
The establishment of RRBs finds its route in the ordinance passed on 26th September 1975, and the RRB Act of 1976.
Prathama Grameen Bank was the first RRB bank and was established on 2nd October 1975.
RRBs perform various functions in the following heads:
Providing banking facilities to rural and semi-urban areas.
Carrying out government operations like the disbursement of wages of MGNREGA workers, distribution of pension, etc.
Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, UPI etc.

212. Which one of the following is not the function of Regional Rural Banks ? [U.P.P.C.S. (Mains) 2005]

(a) To provide credit to small and marginal farmers.
(b) To provide credit to common people in rural areas.
(c) To supplement Scheduled Commercial Banks
(d) To take over the functions of Agriculture Refinance Corporation of India.

Correct Answer: (d) To take over the functions of Agriculture Refinance Corporation of India.

Solution:Taking over the function of Agricultural Refinance Corporation of India is not the function of the Regional Rural Banks, while rest are the functions of RRBs.

RRBs are banks formed in collaboration by the Central Government, State Governments, and Sponsoring Commercial Banks to give loans to rural areas.
Their mission is to fulfill the credit needs of the relatively unserved sections in rural areas: small and marginal farmers, agricultural labourers, and socio-economically weaker sections.
The RRBs mobilize financial resources from rural/semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers, and rural artisans.
Origin:
The Narasimham Committee on Rural Credit (1975) recommended the establishment of RRBs.
The establishment of RRBs finds its route in the ordinance passed on 26th September 1975, and the RRB Act of 1976.
Prathama Grameen Bank was the first RRB bank and was established on 2nd October 1975.
RRBs perform various functions in the following heads:
Providing banking facilities to rural and semi-urban areas.
Carrying out government operations like the disbursement of wages of MGNREGA workers, distribution of pension, etc.
Providing Para-Banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, UPI etc.

213. Which of the following grants/grant direct credit assistance to rural household ? [U.P.S.C (Pre) 2013]

1. Regional Rural Banks

2. National Bank for Agriculture and Rural Development

3. Land Development Banks

Select the correct answer using the codes given below

(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3

Correct Answer: (c) 1 and 3 only

Solution:NABARD does not give direct credit assistance to rural households. It refinances the assistance given by other institutions. Regional Rural Banks (RRBs) also known as Grameen Banks provide banking and financial services in rural areas. The main purpose of RRBs is to mobilise financial resources in rural and semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers and rural artisans.

Land Development Banks have been established in India to provide long term loans to rural households for land development. Since other banks are not able to provide long term loans for buying agricultural machinery and making permanent changes in the land, LDBs were set up to fulfill this purpose.

214. Consider the following events and arrange them in chronological order : [U.P.P.C.S. (Pre) 2020]

1. Establishment of NABARD

2. Self Help Group Bank Linkage Programme

3. Kisan credit Card Plan

4. Establishment of Regional Rural Bank

Select the correct answer from the codes given below :

Codes :

(a) 4, 1, 2, 3
(b) 4, 2, 3, 1
(c) 1, 2, 3, 4
(d) 4, 3, 2, 1

Correct Answer: (a) 4, 1, 2, 3

Solution:

Events	Year
Establishment of NABARD	1982
Self Help Group Bank Linkage Programme	1992-93
Kisan Credit Card Plan	1998
Establishment of Regional Rural Bank	1975

Hence, the correct chronological order is given in option (a).

215. Which of the following does not implement the Self Help Groups (SHGs) -Bank Linkage Programme ? [U.P.P.C.S. (Pre) (Re-Exam) 2015]

(a) NABARD
(b) Commercial Banks
(c) RRBs
(d) Cooperative Banks

Correct Answer: (a) NABARD

Solution:Self Help Groups (SHGs) - Bank Linkage Programme was started by the NABARD in 1992-93 with an aim to provide financial services to the unreached and underserved poor households by linking the SHGs of poor to the formal financial institutions. The programme is implemented by Commercial Banks, Regional Rural Banks (RRBs) and Cooperative Banks. NABARD does not implement this programme.

216. Consider the following statements : [U.P.S.C (Pre) 2023]

1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.

2. In an SHG, all members of a group take responsibility for a loan that an individual member takes.

The Regional Rural Banks and Scheduled Commercial Banks support SHGs.

How many of the above statements are correct ?

(a) Only one
(b) Only two
(c) All three
(d) None

Correct Answer: (b) Only two

Solution:The Self-Help Group (SHG) programme was originally initiated in India by the NABARD. Based on the observations of various research studies and an action research project carried out by NABARD, the model of Self Help Group-Bank Linkage Programme (SHG-BLP) has evolved as a cost- effective mechanism for providing financial services to the unreached and underserved poor households. What started as a pilot to link around 500 SHGs of poor to the formal financial institutions during the year 1992-93 has now become the largest microfinance programme in the world, in terms of the client base and outreach. In an SHG, naturally all members become equally responsible for the loan amount sanctioned. If a member fails to repay the loan, all other remaining members should take the responsibility of repayment. Since the decisions are taken collectively, all members will take up the responsibility of recovering the loans. The Regional Rural Banks and Scheduled Commercial Banks are key financing institutions to support SHGs. Hence, statement 1 is incorrect, while other two statements are correct.

217. Bhandari Committee is related to : [B.P.S.C.(Pre) (Re-Exam) 2022]

(a) Direct taxation
(b) Indirect taxation
(c) Agriculture credit
(d) Regional Rural Bank's restructuring
(e) None of the above/ More than one of the above

Correct Answer: (d) Regional Rural Bank's restructuring

Solution:The Committee on Restructuring of Regional Rural Banks (RRBs), 1994 (Bhandari Committee) identified 49 RRBs for comprehensive restructuring. It recommended greater devolution of decision-making powers to the Boards of RRBs in the matters of business development and staff matters.

The area of operation of RRBs is limited to the area as notified by the Government of India, covering one or more districts in the State.
Regulation: Regional Rural Banks are regulated by the RBI and supervised by the National Bank for Agriculture and Rural Development (NABARD).
Sources of Funds: It comprise of owned funds, deposits, borrowings from NABARD, Sponsor Banks and other sources, including SIDBI and the National Housing Bank.
Management: The Board of Directors manages these banks, overall affairs, which consists of one Chairman, three Directors as nominated by the Central Government, a maximum of two Directors as nominated by the concerned State Government, and a maximum of three Directors as nominated by the sponsor bank.

218. The Narasimham Committee for Financial Sector Reforms has suggested reduction in : [U.P.S.C (Pre) 1995]

(a) SLR and CRR
(b) SLR, CRR and Priority Sector Financing
(c) SLR and Financing to Capital Goods Sector
(d) CRR, Priority Sector Financing and Financing to Capital goods sector

Correct Answer: (a) SLR and CRR

Solution:Two expert Committees were set up in 1990s under the Chairmanship of M. Narasimham (an ex-RBI Governor) which are widely credited for spearheading the financial sector reforms in India. The first Narasimham Committee (Committee on the Financial System - CFS) was constituted in 1991 and the second one (Committee on Banking Sector Reforms) was appointed in 1997. These two committees submitted their reports in 1991 and 1998 respectively. The Narasimham Committee I for Financial Sector Reforms had suggested reduction in Statutory Liquidity Ratio and Cash Reserve Ratio. The Committee was of the view that the reduction of the preempted, portion of

219. Narashimham Committee was related to : [R.A.S /R.T.S. (Pre) 1992, M.P.P.C.S. (Pre) 1993, U.P. Lower Sub. (Pre) 2008, Uttarakhand P.C.S. (Pre) 2006, Uttarakhand U.D.A./L.D.A. (Mains ) 2006]

(a) Higher Education Reforms
(b) Tax Structure Reforms
(c) Banking Structure Reforms
(d) Planning implementation reforms

Correct Answer: (c) Banking Structure Reforms

Solution:Two expert Committees were set up in 1990s under the Chairmanship of M. Narasimham (an ex-RBI Governor) which are widely credited for spearheading the financial sector reforms in India. The first Narasimham Committee (Committee on the Financial System - CFS) was constituted in 1991 and the second one (Committee on Banking Sector Reforms) was appointed in 1997. These two committees submitted their reports in 1991 and 1998 respectively. The Narasimham Committee I for Financial Sector Reforms had suggested reduction in Statutory Liquidity Ratio and Cash Reserve Ratio. The Committee was of the view that the reduction of the preempted, portion of

220. Which of the following committees examined and suggested Financial Sector reforms ? [U.P.S.C (Pre) 2001]

(a) Abid Hussain Committee
(b) Bhagwati Committee
(c) Chelliah Committee
(d) Narasimham Committee

Correct Answer: (d) Narasimham Committee

Solution:Two expert Committees were set up in 1990s under the Chairmanship of M. Narasimham (an ex-RBI Governor) which are widely credited for spearheading the financial sector reforms in India. The first Narasimham Committee (Committee on the Financial System - CFS) was constituted in 1991 and the second one (Committee on Banking Sector Reforms) was appointed in 1997. These two committees submitted their reports in 1991 and 1998 respectively. The Narasimham Committee I for Financial Sector Reforms had suggested reduction in Statutory Liquidity Ratio and Cash Reserve Ratio. The Committee was of the view that the reduction of the preempted, portion of