The Union Cabinet, on Thursday, approved a capital infusion of Rs.632 crore into the cash-starved regional rural banks (RRBs) to improve their capital adequacy norms and capacity to lend to the farm sector.
At its meeting chaired by Prime Minister Manmohan Singh, the Cabinet also decided to extend the scheme of recapitalising weak RRBs by another two years as all the States have not contributed their share in the capital infusion process as yet. As a result, capitalisation has been completed for only 16 banks till March this year.
Announcing the Cabinet decision, an official statement said: “The Union Cabinet, on Thursday, approved the release of 50 per cent share of the Central Government for recapitalisation of the remaining RRBs to improve their capital to risk weighted assets ratio (CRAR)… The release of Central Government share is subject to the release of State Government and sponsor bank share.''
In 2009-10, based on the recommendations of Reserve Bank Deputy Governor K. C. Chakrabarty, the government had initiated the process of recapitalising 40 financially weak RRBs to help them in providing credit to the rural and farm sectors.
Under the scheme, while the Centre's share in the capital infusion is pegged at 50 per cent, the State Government and the sponsor bank concerned have to chip in with their contribution of 15 per cent and 35 per cent, respectively.
In effect, the 16 RRBs now covered under the recapitalisation programme would receive Rs.1,264 crore in fresh capital if all stakeholders contribute their share of funding.
