Cabinet approves changes to Regional Rural Banks Act

The union cabinet Tuesday approved amendments to a law to strengthen the capital base and financial stability of Regional Rural Banks (RRBs).

The amendments are aimed to "enhance authorised and issued capital to strengthen their (RRBs) capital base and to bring flexibility in the shareholding between central government, state government and sponsor bank," a cabinet communique said.

"The amendments will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meeting credit requirements of rural areas and the board of RRBs will be strengthened," it added.

The term of the non-official directors appointed by the central government will be fixed not exceeding three years, the statement said.

The amendments to the RRB Act, 1976 would now be introduced in parliament.

RRBs are an alternative to the cooperative credit structure also to ensure sufficient institutional credit for the rural and agriculture sector.

They are jointly owned by the central government, the concerned state government and sponsor banks, with the issued capital shared in the proportion of 50 percent, 15 percent and 35 percent, respectively.

As per the RRB Act, the authorised capital of each RRB is Rs.5 crore and the issued capital is maximum Rs.1 crore.