The Union Cabinet, chaired by the Prime Minister Narendra Modi, has approved the amendments in the Regional Rural Banks (RRBs) Act, 1976 to enhance authorised and issued capital to strengthen their capital base and to bring flexibility in the shareholding between the Central Government and state governments as well as the sponsor banks. The term of the non-official directors appointed by the Central Government will be fixed, not exceeding three years.
The amendments will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meeting credit requirements of rural areas and the board of RRBs will be strengthened.
Regional rural banks were established under Regional Rural Banks Act, 1976 (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 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 authorised capital of each RRB is Rs. five crore and the issued capital is maximum Rs. one crore.