RRBs, in most cases, seem to have a mixed track record of "successes" on some fronts and "failures" in some others in their business and achievement of goals. Their failure to achieve their objectives can be attributed to several problems they encounter in practice. Following Professor Charan Wadhva, we can point out some of the main problems facing RRBs.
1. Hastyness and Lack of Coordination in the Expansion of the Branch:
The rush in the branch expansion program has in many cases led to a disaster due to lack of coordination. In several cases, it was not possible to ensure that branches of the RRB were opened in centers where commercial or cooperative banking services were not provided.
2. Difficulties in the mobilisation of deposits:
RRBs encountered a number of practical difficulties in the mobilisation of deposits. Due to its restrictive lending policy which excludes richer sectors of village society, these potential depositors show less interest in depositing their money in these banks.
3. Restrictions on the Mobilisation of Deposits:
RRBs exclude the richer sections of the village society to provide direct financial assistance. These sections have potential savings to deposit. However, they are less interested in depositing them in the RRBs in view of the restrictive credit policy of these banks. In addition, state and local governments and their agencies have also not cooperated much in maintaining their deposit accounts with the RRB.
4. Slow progress in lending activity:
The growth rate of RRBs in the lending business is slow. For this reason, the following reasons can be given:
(I) the margin of concession of direct loans granted by the RRB in its fields of operations has been limited;
(Ii) It is always difficult to identify potential small borrowers and bank personnel have been required to make special and sincere efforts in this regard; (Iii) Most small borrowers do not like banking formalities and prefer to borrow from informal / indigenous sources of funding, such as lenders;
(Iv) Anomalies in the Interest Rate Regime (ADR) also posed a special problem to RRBs. While RRBs charge 14 percent interest, commercial banks charge only 4 percent under DIR Scheme in rural areas.
Therefore, no borrower would go to RRBs or cooperative societies in the area when a commercial bank loan is available under the DIR Scheme;
(V) There is no effective link between RRBs and PACS and farmer service societies;
(Vi) There is a lack of coordination between the district's credit planning committees and the RRBs.
5. Urban orientation of staff:
A crucial practical difficulty experienced in their work by RRBs is the urban orientation of their staff who are rarely willing to serve in rural areas. There is no real local involvement of bank staff in the town where they serve.
6. Stiffness of procedure:
RRBs follow deposit and loan procedures from scheduled commercial banks that are very complicated and time-consuming from the villagers' point of view. Rural borrowers always appreciate the informal forms and simple procedures that Indian lenders and bankers have followed.