Regional Rural Banks in India were given statutory form by which Act?

The correct answer is A, 1982. The National Bank for Agriculture and Rural Development began work in 1982, set up on the recommendation of the Sivaraman Committee, and it is the apex development bank for agriculture and the rural economy, refinancing and supervising both Regional Rural Banks and cooperative banks. Option B is wrong; 1991 is the year of the economic reforms and of the first Narasimham Committee on the financial system, not of NABARD. Option C is wrong because 1987 has no connection with the founding of this institution. Option D is wrong although it is the most tempting choice, since 2 October 1975 is the day the first five Regional Rural Banks were set up, seven years before NABARD came into being; candidates who remember only that rural credit began in the mid nineteen seventies fall into it. Keep 1975 for Regional Rural Banks and 1982 for NABARD.

The correct answer is C, thirty five per cent. The capital of a Regional Rural Bank is shared in the ratio of fifty, thirty five and fifteen: the Central Government holds fifty per cent, the sponsor bank thirty five per cent and the State Government fifteen per cent. Option A is wrong because fifty per cent is the share of the Central Government, and choosing it means reading the largest holder as the sponsor bank. Option B is wrong since fifteen per cent belongs to the State Government, the smallest of the three shares. Option D is wrong because twenty five per cent appears nowhere in this pattern and is put in as a plain distractor. After the amendment of 2015 such a bank may raise capital from other sources as well, but the three original holders together must keep at least fifty one per cent, so government control cannot be lost.

The correct answer is A, Prathama Bank. Prathama Bank, with its head office at Moradabad in Uttar Pradesh and sponsored by Syndicate Bank, was the first of the five Regional Rural Banks set up on 2 October 1975, and its name, meaning the first, is itself the hint. Option B is wrong because Haryana Gramin Bank came much later and is a product of the amalgamations that began in 2005. Option C is wrong; Kerala Gramin Bank was likewise formed by merging earlier banks of that state. Option D is wrong because Baroda Rajasthan Kshetriya Gramin Bank is also an amalgamated bank, and its name gives away the sponsor rather than the date. Since amalgamation keeps changing the list of Regional Rural Banks, learn the fixed facts instead: the first bank, the first date and the sponsor.

The correct answer is B, the Narasimham Working Group of 1975, which proposed a new kind of rural institution combining the local feel of a cooperative with the discipline of a commercial bank, and the first Regional Rural Banks followed on 2 October of that year. Option A is wrong because the Gorwala Committee, formally the All India Rural Credit Survey Committee of 1954, dealt with cooperative credit and state partnership in cooperatives. Option C is wrong; the Maclagan Committee of 1915 examined the working of cooperative societies in the colonial period. Option D is wrong because the Vaidyanathan Committee of 2004 recommended the revival of the short term rural cooperative credit structure. Note that the same name Narasimham also attaches to the two committees on banking sector reform of 1991 and 1998, so the year in the stem matters.

The correct answer is C, the Primary Agricultural Credit Society. In the short term cooperative credit structure the base is the Primary Agricultural Credit Society in the village, above it stands the District Central Cooperative Bank and at the apex of the state stands the State Cooperative Bank. Option A is wrong because the State Cooperative Bank is the top tier and deals with the district banks, not directly with farmers. Option B is wrong since the District Central Cooperative Bank is the middle tier. Option D is wrong because the land development bank belongs to the long term or investment credit structure, now called the Primary Cooperative Agriculture and Rural Development Bank at the base and the State Cooperative Agriculture and Rural Development Bank at the apex. Remember that the long term structure has two tiers while the short term one has three; a paper often tests exactly that difference.