Government today approved amendments to a law to strengthen capital base and financial stability of Regional Rural Banks (RRBs).
The amendments to the RRBs Act, 1976 were cleared by the Cabinet chaired by Prime Minister Narendra Modi and would be introduced in Parliament.
The amendments are aimed to enhance authorised and issued capital to strengthen their capital base and to bring flexibility in the shareholding between Central Government, State Government and sponsor bank, said an official statement.
The term of the non-official directors appointed by the Central Government will be fixed not exceeding three years.
"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.
RRBs are an alternative channel to cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector.
They are jointly owned by Government of India, the concerned State Government and sponsor banks with the issued capital shared in the proportion of 50 per cent, 15 per cent and 35 per cent, respectively.
As per provisions of the RRBs Act, the authorised capital of each RRB is Rs five crore and the issued capital is maximum Rs one crore.
