Banking plays a vital role in the growth and development of developing countries like India. Banks lubricate the entire monetary and financial system and ensure smooth operations. Nearly 70%of the total of Indian population lives in rural areas. For the development of Indian economy, there is a need for the development of the rural areas. For the purpose of rural development, there is a need for the banking system in rural areas which provide credit at lower and at reasonable terms to the rural households unlike traditional moneylenders which exploit the rural people by providing loans at a very high interest rate which leads to rural people were unable to repay loans given by moneylenders and lost everything and also commit suicide. To avoid all those negative consequences, the government appoints a working group on rural credit, the Narasimhan committee. On the basis of recommendations given by the Narasimhan committee, regional rural banks were established. The main objective behind the establishment of these banks is the development of agriculture, trade, commerce, industry and other productive activities in the rural areas particularly in those areas where banking services does not exist and make available cheaper institutional credit to the weaker sections of the society.

This research paper throws light on the need of banking system in rural areas and significant role played by banking system in the development of rural areas and discusses about the problem faced by regional rural banks in India and suggestions to overcome the problems. The main aim of this paper is to analyse the present level of financial performance of RRBs in India as on 31st march 2017 in comparison to 31st march 2016. This study is based on the secondary data collected from the annual reports of NABARD. This study finds and concludes that the RRBs play a very important role in the development of rural areas.

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Keywords: Regional Rural Banks, Rural Development, Credit Facilities, Banking.