They were created to serve rural areas with basic banking and financial services.

The Government of India enacted the Regional Rural Banks Act in 1976, which led to the establishment of the first five RRBs on 2 October 1975.

RRBs perform various functions such as providing banking facilities to rural and semi-urban areas, carrying out government operations like disbursement of wages of MGNREGA workers and distribution of pensions, providing para-banking facilities like locker facilities, debit and credit cards, mobile banking, internet banking, and UPI services.

As a result, five RRBs were set up on 2 October 1975 on the recommendations of the Narsimhan Committee on Rural Credit, during the tenure of Indira Gandhi's government.

Prathama Bank, with head office in Moradabad, Uttar Pradesh was the first RRB.

A committee was constituted in September 2009 under the chairmanship of K C Chakrabarty,[4] the deputy governor of the Reserve Bank of India (RBI) to analyse the financials of the RRBs and suggest measures, including re-capitalisation to bring the CRAR of RRBs to at least 9% in a sustainable manner by 2012.

reads:[10] For the incorporation, regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural laborers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto.There are 43 RRBs since 1 April 2020.