An employee serves customers inside a branch of Gramin Bank of Aryavart, sponsored by Bank of India, in the village of Khurana, Uttar Pradesh, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Cabinet Nod For Extension Of Regional Rural Banks’ Recapitalisation Scheme

The government today approved extension of recapitalisation scheme for regional rural banks for next three years up to 2019-20 with an aim to strengthen their lending capacity.

The scheme started in financial year 2010-11 and was extended twice in years 2012-13 and 2015-16. The last extension was up to March, 2017.

A total of Rs 1,107.2 crore, as government’s share, out of Rs 1,450 crore, has been released to RRBs till March last year.

The remaining Rs 342.8 crore will be utilised to provide recapitalisation support to RRBs whose capital to risk weighted assets ratio is below 9 percent, during 2017-18, 2018-19 and 2019-20, an official statement said after the Cabinet meeting.

“This [the approval] will enable the RRBs to maintain the minimum prescribed CRAR of 9 percent," it said, and added that the identification of RRBs requiring recapitalisation and the amount of capital will be decided in consultation with NABARD.

There were 56 functioning RRBs as of March, 2017. They had extended credit of Rs 2,28,599 crore.

“A strong capital structure and minimum required level of CRAR will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meeting the credit requirements of rural areas,” the release said.

RRBs were set up with the objective to provide credit and other facilities, especially to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in rural areas.

They are jointly owned by the Centre, the concerned state government and sponsor banks with the issued capital shared in the proportion of 50 percent, 15 percent and 35 percent, respectively.

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