Cultured and cloned bacterial community inhabiting rice stubble was analyzed with respect to the functional traits cellulolytic, chitinolytic and fluorescent activity. Effects of selected bacteria on rice seed germination and seedling development as well as interaction against R. solani were also investigated. Molecular diversity using 259 bacterial isolates and 325 cloned PCR-products was assessed by sequencing the 16S rRNA. The results showed that Bacillaceace, Burkholderiaceae, Enterobacteraceae and Pseudomonadaceae were most common among the cultured bacteria while Bacillaceace together with Rhizobiaceae were the most common groups among the cloned bacteria. The phylogenetic difference between cloned and cultured material was significant. Furthermore, we found a significant linkage between the phylogeny in terms of unique branch length leading to taxa with the functional traits; cellulolytic and chitinolytic activities. Five deleterious bacteria were identified based on their effect on rice radicle length growth. The deleterious trait could not be mapped to specific phylogenetic lineages. Most of the tested bacteria showed an inhibitory effect on the growth of R solani in in-vitro tests.