Press Information Bureau

Government of India

Cabinet

31-January-2013 16:01 IST

The Union Cabinet today gave its approval to the proposed amendments in the Regional Rural Banks (RRBs) Act, 1976 to enhance authorized and issued capital to strengthen their capital base. The term of the non-official directors appointed by the Central Government is proposed to be fixed not exceeding two years.

The proposed amendments will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meet the credit requirements of rural areas and the Boards of RRBs will be strengthened.

Background

Regional Rural Banks (RRBs) were established under Regional Rural Banks Act, 1976 (the RRB Act) to create an alternative channel to the 'cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector. RRBs are jointly owned by the Government of India, the concerned State government and sponsor banks, with the issued capital shared in the proportion of 50 percent, 15 percent and 35 percent, respectively. As per provisions of the Regional Rural Banks Act, 1976 the authorized capital of each RRB is Rs. 5 crore and the issued capital is a maximum Rs. 1 crore.

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SC/SM

Strengthening RRB capital structure: amendments enable higher authorized and issued capital and fixed director terms. Amendments to the Regional Rural Banks Act, 1976 would raise statutory ceilings on authorized and issued capital and fix the term of non official directors appointed by the Central Government at not exceeding two years, thereby strengthening RRB boards and enhancing their capacity to meet rural credit needs and support financial inclusion.