RAS question
Which committee recommended the establishment of Regional Rural Banks (RRBs)?
Correct answer: (C) M. Narasimham Working Group.
The M. Narasimham Working Group recommended the establishment of Regional Rural Banks in 1975, and RRBs were later established under the Regional Rural Banks Act, 1976 to serve the rural population.
Explanation
The answer is the M. Narasimham Working Group. The RBI Bulletin explains the policy context: rural credit had not improved enough because commercial banks were not well tuned to the needs of small and marginal farmers, while cooperatives lacked the resources to meet expected demand. The proposed solution was a separate banking structure that could combine the local familiarity of cooperatives with the professionalism and larger resource base of commercial banks. Following the Narasimham Working Group's 1975 recommendations, Regional Rural Banks were set up. The legal point usually tested in exams is that RRBs were established under the Regional Rural Banks Act, 1976 to serve the rural population.
Why the other options are wrong
- (A) The Tandon Committee is linked to working capital assessment, not to recommending the creation of Regional Rural Banks.
- (B) The Narasimham Committee referred to in the option is the 1991 banking-sector reforms committee, whereas RRBs followed the 1975 M. Narasimham Working Group.
- (D) The Kelkar Committee is associated with tax reforms, not with the institutional design of rural banks.
Concept
This tests the evolution of India's rural credit institutions, especially the committee-to-institution links behind RRBs. It recurs in RAS because agricultural credit, priority-sector lending and rural banking are standard Indian Economy areas.