In a bid to fortify lending capacity in almost all Regional Rural Banks (RRBs) in the country, the Government of India gave an extension nod of their recapitalization for next three years up to 2019-20 in consultation with NABARD. The recapitalization scheme started in 2010-11 and was extended twice in 2012-13 and 2015-16. The last extension was up to March 2017.
The move of the Government is aimed at strengthening the lending capacity of all RRBs in India as they face a huge shortage of funds in their banks. A total of Rs 1,107.20 crore, as the Government’s share, out of Rs 1,450 crore, has been released to RRBs till March last year, while the remaining Rs 342.80 crore will be utilised to provide recapitalisation support to RRBs whose Capital to Risk Weighted Assets Ratio (CRAR) is below 9 per cent, 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 recapitalization and the amount of capital will be decided in consultation with NABARD.
There were 56 functioning RRBs as of March 2017. They had the extended credit of Rs 2,28,599 crore. “A strong capital structure and minimum required level of CRAR will ensure the 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 statement said.
The RRBs were set up with the objective to provide credit and other facilities, especially to the small and marginal farmers, agricultural laborers, 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.