Recapitalization of Regional Rural Banks will continue

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Union Cabinet has approved extension of scheme of recapitalization of Regional Rural Banks (RRBs) for next three years (upto 2019-20). This will enable RRBs to maintain minimum prescribed Capital to Risk Weighted Assets Ratio (CRAR) of 9%. It will ensure strong capital structure and minimum required level of CRAR. This will facilitate financial stability of RRBs and enable them to play greater role in financial inclusion and meeting the credit requirements of rural areas.

  • The scheme of Recapitalization of RRBs was started in 2010-11 and was extended twice in the year 2012-13 and 2015-16.
  • The last extension was upto March 2017. 
  • Total amount of Rs. 1107.20 crore, as Central Government share, out of Rs. 1450 crore, was released to RRBs upto March, 2017.
  • The remaining amount of Rs.342.80 crore will be utilized to provide recapitalization support to RRBs whose CRAR is below 9%, during the extended three years period.
  • This will be in addition to announcement made in 2018-19 Budget of allowing financially strong RRBs to raise capital from sources other than Central Government, State Government and Sponsor Bank.
  • The identification of RRBs requiring recapitalization and amount of capital to be provided will be decided in consultation with NABARD.

Regional Rural Banks (RRBs) :

  • RRBs were set up as a government-sponsored, regional based rural lending institutions under Regional Rural Banks Act, 1976.
  • They are scheduled commercial banks (Government banks) and are configured as hybrid micro banking institutions, combining local orientation and small scale lending culture of cooperatives and business culture of commercial banks.
  • RRBs are jointly owned by Central Government, concerned State Government and Sponsor Banks with the issued capital shared in the proportion of 50%, 15% and 35% respectively.