Regional Rural Banks (RRBs) were established in 1975 under the provisions of the Ordinance promulgated on the 26th September 1975 and followed by Regional Rural Banks Act, 1976 with a view to develop the rural economy and to create a supplementary channel to the ‘Cooperative Credit Structure’ with a view to enlarge institutional credit for the rural and agriculture sector.
The Government of India, the concerned State Government and the bank, which had sponsored the RRB contributed to the share capital of RRBs in the proportion of 50%, 15% and 35%, respectively.
The area of operation of the RRBs is limited to notified few districts in a State.
The RRBs mobilise deposits primarily from rural/semi-urban areas and provide loans and advances mostly to small and marginal farmers, agricultural labourers, rural artisans and other segments of priority sector.
Following the suggestions of the Kelkar Committee, the government stopped opening new RRBs in 1987 – by that time their total number stood at 196.
For restructuring and strengthening of the banks, the governments set up two committees – the Bhandari Committee (1994–95) and the Basu Committee (1995–96).
The RBI in 2001 constituted a Committee under the Chairmanship of Dr. V S Vyas on “Flow of Credit to Agriculture and Related Activities from the Banking System” which examined relevance of RRBs in the rural credit system and the alternatives for making it viable.
The consolidation process thus was initiated in the year 2005 as an off-shoot of Dr. Vyas Committee Recommendations.
First phase of amalgamation was initiated Sponsor Bank-wise within a State in 2005 and the second phase was across the Sponsor banks within a State in 2012.
The process was initiated with a view to provide better customer service by having better infrastructure, computerization, experienced work force, common publicity and marketing efforts etc.
Dr. K.C. Chakrabarty Committee had reviewed the financial position of all RRBs in 2010 and recommended for recapitalization of 40 out of 82 RRBs for strengthening their CRAR to the level of 9 per cent by 31st March, 2012.
Number of RRBs as on 31st March, 2015 stands at 56 playing a significant role in developing agriculture and rural economy.
Objectives of RRBs—
 Bridging the credit gap in rural areas.
 Reduce regional imbalances and increase rural employment generation.
 To grant loans and advances to small and marginal farmers and agricultural labourers.
 To grant loans and advances to artisans‚ small entrepreneurs, etc.
 To cultivate the banking habits among the rural people.
 To encourage entrepreneurship in rural areas.
RRBs Amendment Act 2015—
 This amendment bill increases the authorized capital of each Regional Rural Bank (RRB) from Rs 5 crore to Rs 2000 crore divided into Rs 200 crore of fully paid share of Rs 10 each.
 The Act allows RRBs to raise capital from sources other than the existing shareholders central and state governments, and sponsor banks.
 Here, the combined shareholding of the central government and the sponsor bank cannot be less than 51%.
 It also provides that the authorised capital issued by any RRB’s shall not be reduced below Rs 1 crore.
 The Central Government may appoint an officer of the Central Government on the Board of Regional Rural Banks, if it considers necessary for the purposes of effective functioning of the Regional Rural Banks.
 No person shall be nominated as a director, if he is already a director on the Board of any other Regional Rural Bank.
 The bill raises the tenure of directors to 3 years from existing 2 years.
 No such director shall hold office either continuously or intermittently for a period exceeding six years.