Question

Distinguish between rural banks and commercial banks

Answer 1

Answer:

RRB also known as Regional Rural Bank and commercial banks performs quite similar functions, however there is some difference between the two. Let’s look at the difference between RRB and commercial banks –

While the main reason behind the existence of RRB is the development of rural and backward areas, and also providing banking facility to rural population whereas the main reason behind the existence of commercial banks is to make profits out of their operations.

Scope of RRB is limited to agriculture finance, small sector loans, handicrafts and other small sector loans, whereas scope of commercial banks is wide and it not only provides agriculture finance but also housing loan, car finance, letter of credit, credit to big companies and for many activities.

RRB is present in rural and semi urban areas only whereas commercial banks do operations in all over the country that is rural, semi urban and urban areas.

While the focus of RRB is more on accepting deposits and granting of loans to the people whereas the focus of commercial banks apart from lending and borrowing is on many other services like stock broking, asset management, insurance, merchant banking, venture capital financing, foreign exchange related business etc…

Stakeholders of RRB include government of India, state government and commercial banks whereas stakeholders of commercial banks are public, central government etc…

Answer 2

Answer:

Rural Banks :

• RRB, also known as Regional Rural Banks(RRB).While the main reason for the existence of RRB is to develop rural and backward areas and also to provide banking services to the rural people, while the main reason for the existence of the commercial banks is to make a profit from their activities.

• The scope of the RRB is limited to agricultural finance, small sector loans, crafts and other small sector loans, while the scope of commercial banks is broad, offering not only agricultural finance but also housing loans,Car financing, letters of credit, loans to large companies and for many activities.
• RRB is only present in rural and semi-urban areas.  RRB stakeholders include Government of India, State Government and Commercial Banks

Commercial Banks :

• Commercial banks operate across the country, in rural, semi-urban and urban areas.
• The main role of commercial banks is to provide financial services to the general public and business, ensuring economic and social stability and sustainable growth of the economy. In this respect, credit creation is the most significant function of commercial banks.

• Commercial banks focus on other services besides lending and borrowing, such as stock broking, wealth management, insurance, commercial banking, venture capital finance and foreign exchange related businesses, etc

• Stakeholders of commercial banks are mainly public,central government etc.

#SPJ2