Prop for rural banks stays

New Delhi: The government on Wednesday approved the extension of the recapitalisation scheme for regional rural banks (RRBs) for the next three years up to 2019-20 in order to strengthen their lending capacity.

The scheme started in 2010-11 and was extended twice in 2012-13 and 2015-16. The last extension was up to March, 2017. A total of Rs 1,107.20 crore, as government's share, out of Rs 1,450 crore, has been released to RRBs till March last year.

The remaining Rs 342.80 crore will be used 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 per cent," it said, and added that the identification of RRBs requiring recapitalisation and the amount of capital will be decided in consultation with Nabard.

There were 56 functioning RRBs as of March 2017. They had extended credit of Rs 2,28,599 crore.

"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 help meet the credit requirements of rural areas," the release said.

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.


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