The Union Cabinet on Thursday allowed capital infusion of Rs 632 crore in the cash-hungry regional rural banks (RRBs), and decided to extend this scheme of capitalisation for two more years for state governments to contribute their share.
The Cabinet approved the release of 50 per cent share of the central government for recapitalisation of the remaining RRBs to improve their CRAR (capital to risk weighted assets ratio), according to an official statement. The issued capital of RRBs is shared by the Centre, the state government concerned and the sponsor bank in the proportion of 50 per cent, 15 per cent and 35 per cent, respectively.
The recapitalisation programme started in 2009-10 — initially with 40 banks. The amount will be shared by stakeholders in proportion to their shareholding.
“RRBs will get Rs 632 crore from the central government,” said a minister after on Thursday’s meeting of the Cabinet.
Reserve Bank Deputy Governor K C Chakrabarty said the aim was to make these banks capital-strong, so that they could provide credit for the rural and agriculture sectors. Till March 2012, capitalisation was done in only 16 banks, as several states did not provide their contribution.
The release of central government share is subject to the release of state and the sponsor bank share. Capitalisation has been completed in 16 RRBs till the end of March, 2012, the official statement added.
