Strengthen RRBs with Social Responsibility, Not Profit Motives: Dr. R Ramakumar
In his keynote address at the RRB Golden Jubilee seminar, Dr Ramakumar, member of the Kerala State Planning Board, called for preserving the social objectives of rural banking and warned against commercialisation through privatisation and viability plans.
Author: Abhivad
Published: 7 hours ago
“Regional Rural Banks have played a crucial role in India’s rural economic leap, particularly through agrarian credits. This is a remarkable achievement, realised not through conventional banking, but through a model rooted in social responsibility,” said Dr R Ramakumar, member of the Kerala State Planning Board, in his keynote address at the seminar “Rural Economy – Introspection and Future” held at AKG Hall, Kozhikode.
The seminar was part of the 50th anniversary celebrations of the formation of Regional Rural Banks (RRBs), organised under the leadership of the All India Regional Rural Bank Employees Association (AIRRBEA). The event witnessed participation from employees, officers and retirees of Kerala Gramin Bank.
Role of RRBs in Agrarian Development
Dr Ramakumar highlighted the critical role of RRBs in extending low-interest credit to small and marginal farmers. “In India, the majority of the population depends on agriculture, yet around 60 percent of them remain poor. Profitability in farming is low and input costs are rising. Farmer suicides are still a harsh reality,” he said. “In this context, institutions like RRBs are indispensable. They are a lifeline for the rural poor and must be protected.”
He recalled how RRBs played a historic role during the Green Revolution by making agricultural credit accessible. In the post-1990s period, when commercial banks began withdrawing from unorganised and rural sectors under neo-liberal economic reforms, RRBs continued to serve the rural economy.
“RRBs are now on par with public sector banks in terms of branch network and business size. In such a situation, the formation of a National Rural Bank of India (NRBI) is essential to further strengthen rural banking. But this must be done while upholding the principle of social responsibility,” he said.
Warning Against Privatisation
Dr Ramakumar strongly opposed the move to sell shares of RRBs to private or foreign capital. “Any attempt to privatise RRBs for profit will face strong resistance from employees. Such actions will dismantle an institution that is the backbone of rural livelihoods,” he cautioned.
He noted that RRBs are not profit-making institutions but instruments of inclusive financial access. Their foundational objectives must not be diluted by commercial interests.
Challenges in the New Economic Landscape
Dr Ramakumar traced the trajectory of Indian banking from the period of nationalisation to the present. “During nationalisation, banking had a social and developmental focus. However, with the advent of neo-liberal policies in the 1990s, this focus shifted towards commercial banking,” he said.
He noted that public sector banks began reducing their priority sector lending, and this shift also affected RRBs. Government recapitalisation of RRBs in 2022–23, amounting to ₹10,890 crore, came with conditions. In exchange for financial support, RRBs were required to prepare viability plans aimed at enhancing profitability.
Implications of the Viability Plan
The viability plan includes key objectives such as credit expansion, business diversification, NPA reduction, cost rationalisation, and increased technology adoption. While these goals may seem positive, Dr Ramakumar warned that they could lead to commercialisation.
“Business diversification could imply a shift towards corporate loans. Cost rationalisation in India often translates to de-staffing. Technology adoption should not become a justification for reducing workforce strength in rural banks,” he said.
He cautioned that similar strategies adopted by commercial banks in the 1990s had resulted in a departure from the goals of social banking and welfare.
Declining Access to Credit for Small Farmers
Dr Ramakumar cited Reserve Bank of India data to underline the decline in small-scale agricultural lending. Only 40% of direct finance in commercial banks comprises loans up to ₹2 lakh, which typically benefit small farmers. The remaining 60% are larger loans, often accessed by agribusiness and corporate farming companies.
He added that 25% of agricultural loans from commercial banks are disbursed through urban branches, as many corporate entities are headquartered in cities. “This shows that priority sector lending targets do not solely benefit rural farmers,” he observed.
He urged employees’ unions and stakeholders to ensure that RRBs do not follow the same path. “We must safeguard what has been achieved in terms of employee welfare and rural development. There must be no retreat from the foundational principles of rural banking,” he concluded.
Call for Collective Vigilance
Dr Ramakumar called for collective vigilance from unions and the public to defend RRBs against any moves that could undermine their mission. He emphasised that preserving the rural character of RRBs is vital for sustaining agricultural livelihoods and rural employment.
The keynote address received wide attention at the seminar, which aimed to reflect on the journey of RRBs over the past five decades and chart out a course to ensure their continued relevance and integrity in the future.
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