The establishment of the new institution of the regional rural banks (RRBs) in India since 1975 has aroused a great deal of interest and controversy among the policy-makers and observers of the Indian economy. The purpose of this paper is to examine the background and salient features of the scheme for establishing the RRBs and to evaluate their performance. The paper concludes that the RRBs have been set up for meeting a distinctive objective and felt need in the area of rural credit. They may be identified as the development banks of the rural poor in India. These banks have had to work under several constraints some of which were totally beyond their control. Due credit must be given to the RRBs and their sponsoring banks for having achieved some tangible results within a short period of time. The paper cites the experience of the working of two RRBs as case studies. Based on the experience gained so far, this paper presents a case for reorganizing the working of the RRBs along certain lines for strengthening their role so that they can achieve the objectives for which they have been set up.