Regional Rural Banks were set up on the basis of the recommendations of the Narasimham Working Group (1975), and after the legislation of the Regional Rural Banks Act, 1976.

Committee Recommendation:
The Regional Rural Banks (RRBs) were set up on the recommendation of the Narasimham Working Group.

Narasimham Working Group:
The Narasimham Working Group was set up in 1975 under the chairmanship of Mr. M. Narasimham, former RBI Governor, to study the issues related to rural credit and banking in India.

Recommendations:
The Narasimham Working Group recommended the establishment of RRBs to provide credit and banking facilities to rural areas and promote financial inclusion. RRBs were envisioned as institutions that would bridge the gap between the formal banking sector and rural population.

Objectives of RRBs:
The main objectives of setting up RRBs were to mobilize rural savings, provide credit to the rural sector, and promote rural development. These banks were meant to cater to the banking needs of the rural population and support agricultural and rural activities.

Implementation:
Based on the recommendations of the Narasimham Working Group, the Regional Rural Banks Act was passed in 1976, and RRBs were established to operate in rural areas across India. These banks were jointly owned by the Central Government, the State Government, and the sponsor bank.

Significance:
The establishment of RRBs played a crucial role in extending banking services to the rural population and promoting financial inclusion. These banks have been instrumental in providing credit facilities to farmers, small businesses, and other rural individuals, thus contributing to the overall development of the rural economy.

In conclusion, the Narasimham Working Group's recommendation to set up RRBs has had a significant impact on rural banking in India, enabling greater access to financial services in rural areas and supporting the growth of the rural economy.