Bill in LS to enable RRBs to raise funds from market

Government today introduced in the Lok Sabha a bill to raise the authorised capital of Regional Rural Banks (RRBs) to Rs 2,000 crore while enabling them to mop up funds from the capital market.
The Regional Rural Banks (Amendment) Bill, 2014, which was tabled by Finance Minister Arun Jaitley, seeks to raise the authorised capital of the RRBs from Rs 5 crore to Rs 2,000 crore.
Under the proposed dispensation, the share capital of the RRBs could be split into 200 crore equity shares of Rs 10 each. As per the existing Act, the Rs 5 crore share capital of RRBs is split into 5 lakh shares of Rs 100 each.

The changes in the RRB Act, are aimed at "strengthening the capital base and improve their overall capabilities".
The amendment envisages that the capital of government entities will not come down below 51 per cent in the RRBs.
As per the statement of Objects and Reasons, the amendment seeks to "make provision for raising capital by RRBs from sources other than Central government, State government and the sponsor bank subject to the condition that in no event the combined capital ... Shall not be less than 51 per cent."

The changes in the Act will also provide for election of directors from sources other than Central government, state government and the sponsor bank.

The RRBs were set up in pursuance of the Regional Rural Banks Act, 1976, to meet the credit needs of the rural sector. Currently there are over 50 RRBs in the country.
Earlier this month, the government had allowed public sector banks to raise up funds from markets by diluting government holding to 52 per cent in phases so as to meet Basel III capital adequacy norms.