Cabinet likely to consider capital infusion in RRBs tomorrow

The Union Cabinet is likely to consider tomorrow further recapitalisation of rural regional banks (RRBs) in a bid to strengthen their lending capacity, sources said.

With a view to bringing the Capital to Risk Weighted Assets Ratio (CRAR) of RRBs to at least 9 per cent, K C Chakrabarty Committee had recommended recapitalisation support to the extent of Rs 2,200 crore to 40 of 82 RRBs in 21 states.

The recapitalisation process started in 2010-11. The share of central government in respect of some RRBs could not be released in the absence of the release of the share of state governments.

Sources said the Finance Ministry has sought nod of the Cabinet headed by Prime Minister Narendra Modi for continuation of the process of recapitalisation of RRBs by providing them minimum regulatory capital for maintaining CRAR of 9 per cent for three years beyond 2016-17 up to 2019-20.

Total financial implication on account of capital infusion would be Rs 292.41 crore, they added.

The Cabinet's approval has also been sought to utilise the leftover amount of Rs 342.80 crore of the Rs 1,450 crore earlier approved by the Cabinet between 2011 and 2015.

In July 2015, the Cabinet had sanctioned Rs 700 crore for the recapitalisation of RRBs and extended the validity period for the fund infusion to fiscal 2016-17.

RRBs were established under Regional Rural Banks Act, 1976, to create an alternative channel to the 'cooperative credit structure' and to ensure sufficient institutional credit for the rural and agriculture sector.

Regional rural banks are jointly owned by the Centre, state governments and sponsor banks with the issued capital shared in the proportion of 50 per cent, 15 per cent and 35 per cent respectively.