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Recapitalisation of rural banks to be extended till FY20

The Union Cabinet has approved the extension of the scheme of recapitalisation of Regional Rural Banks for the next three years, upto 2019-20

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The Union Cabinet chaired by the Prime Minister Narendra Modi has approved the extension of the scheme of recapitalisation of Regional Rural Banks (RRBs) for the next three years, upto 2019-20. This will enable the RRBs to maintain the minimum prescribed Capital to Risk Weighted Assets Ratio (CRAR) of 9 percent.
 
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.
         
There are 56 RRBs functioning in the country. As on March 31, 2017, the total credit given by RRBs is Rs.2,28,599 crore, of which the credit under key categories is as under:

Particulars

 

Credit Amount (Rs. crores)

 

%age to total credit

 

Total Priority Sector Lending (PSL)

2,05,122

 

89.73%

 

Agriculture (Under PSL)

1,54,322

67.51%

Small & marginal farmers (Under Agriculture)

 

1,02,791

 

44.97%

 

(Source: NABARD)
 
The scheme of recapitalisation of RRBs started in FY 2010-11 and was extended twice in the year 2012-13 and 2015-16. The last extension was upto 31.03.2017. A total amount of Rs.1107.20 crore, as Central government share, out of Rs.1450 crore, has been released to RRBs upto March 31, 2017. The remaining amount of Rs.342.80 crore will be utilised to provide recapitalisation support to RRBs whose CRAR is below 9 percent, during the years 2017-18, 2018-19 and 2019-20.
 
The identification of RRBs requiring recapitalisation and the amount of capital to be provided, will be decided in consultation with NABARD.
 
This is in addition to the announcement made in Finance Minister's Budget Speech for 2018-19 relating to allowing financially strong RRBs to raise capital from sources other than Gol, state governments and sponsor banks.
 
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 for development of agriculture, trade, commerce, industry and other productive activities. RRBs are jointly owned by Government of India, the respective 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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