The Performance of Regional Rural Banks and Non-Banking Institutions in Priority Sector Lending: A Study on West Bengal

The IUP Journal of Bank Management, Vol. XV, No. 3, August 2016, pp. 36-51

Posted: 6 May 2017

See all articles by Paromita Dutta

Paromita Dutta

University of Calcutta - St. Xavier’s College (Autonomous), Kolkata

Mahua Bhattacharya

University of Calcutta

Date Written: 2016

Abstract

This paper addresses two main questions: Are the Regional Rural Banks (RRBs) and non-banking institutions of West Bengal performing well in the remotest part of rural areas? If so, how pervasive are they in priority sector lending? To address these questions, a study was undertaken by selecting a sample of 125 respondents from different remotest rural areas of West Bengal and the responses collected for each of the five different priority sectors, viz., agriculture, micro and small-scale enterprises, education, housing and others (includes Self-Help Groups (SHGs), joint liability groups, other backward classes, women, etc.), were analyzed. The study involved a two-step empirical procedure: exploratory factor analysis and Structural Equation Modeling (SEM). The findings of this study provide that apart from ‘others’ sector, none of the remaining priority sectors gives a positive indication about the effect of the performance of RRBs and non-banking institutions in priority sector lending. Due to the rising cost of Non-Performing Assets (NPAs), in the near future, operations of RRBs can only be improved if they are merged with sponsor banks or by going through the privatization route.

Suggested Citation

Dutta, Paromita and Bhattacharya, Mahua, The Performance of Regional Rural Banks and Non-Banking Institutions in Priority Sector Lending: A Study on West Bengal (2016). The IUP Journal of Bank Management, Vol. XV, No. 3, August 2016, pp. 36-51, Available at SSRN: https://ssrn.com/abstract=2963568

Paromita Dutta (Contact Author)

University of Calcutta - St. Xavier’s College (Autonomous), Kolkata ( email )

30 Mother Teresa Sarani
Kolkata, West Bengal 700047
India

Mahua Bhattacharya

University of Calcutta ( email )

Senate House, 87/1 College Street
Bagnan
Kolkata, West Bengal 700073
India

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