|PRESENT SCENARIO of REGIONAL RURAL BANKS|RECAPITALlZATION OF REGIONAL RURAL BANKS |Regional Rural Banks CONCEPTION AND PRESENT SCENARIO|
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Regional Rural Banks CONCEPTION AND THE BRIEF HISTORY PRESENT SCENARIO
Regional Rural Banks in India are an integral part of the rural credit structure of the country.
Since the very beginning, when the Regional Rural Banks in India (RRBs) were established in October 2,1975, these banks played a pivotal role in the economic development of the rural India.
The main goal of establishing regional rural banks in India was to provide credit to the rural people who are not economically strong enough, especially the small and marginal farmers, artisans, agricultural labours, and even small entrepreneurs.
As on date 82 RRBs are functioning in the country.
THE CONCEPTION AND THE BRIEF HISTORY
- The history of regional rural banks in India dates back to the year 1975.
- It’s the Narsimham committee that conceptualized the foundation of regional rural banks in India.
- The committee felt the need of ‘regionally oriented rural banks’ that would address the problems and requirements of the rural people with local feel, yet with the same level of professionalism of commercial banks.
- Five regional rural banks were set up on October 2 with a total authorized capital of’ 1 crore, which later augmented to . 5 crore. There were five commercial banks, viz. Punjab National Bank, State Bank of India, Syndicate Bank, United Bank of India and United Commercial Bank, which sponsored the regional rural banks.
- RRBs are jointly owned by Government of India, the State Government concerned and the Sponsor Banks. The issued capital of RRBs is subscribed by Central Government, State Government and sponsor banks in the proportion of 50%, 15% afld 35%, respectively.
RECAPITALlZATION OF REGIONAL RURAL BANKS (RRBS) TO IMPROVE THEIR CAPITAL TO RISK WEIGHTED ASSETS RATIO
- The Union Cabinet recently approved the recapitalization of Regional Rural Banks (RRBs) to improve their Capital to Risk Weighted Assets Ratio CRAR) in the following manner:
- (a) Share of Central Government i.e. Rs.1, 100 crore will be released as per provisions made by the Department of Expenditure in 2010-11 and 2011-12. However, release of Government of India share will be contingent on proportionate release of State Government and Sponsor Bank share.
- (b) A capacity building fund with a corpus of Rs.100 crore to be set up by Central Government with NABARD for training and capacity building of the RRB staff in the institution of NABARD and other reputed institutions. The functioning of the Fund will be periodically reviewed by the Central Government. An Action Plan will be prepared by NABARD in this regard and sent to Government for approval.
- (c) Additional amount of Rs. 700 crore as contingency fund to meet the requirement of the weak RRBs, particularly those in the North Eastern. and Eastern Region, the necessary provisioh will be made in the Budget as and when the need arises.
PRESENT SCENARIO of REGIONAL RURAL BANKS
- Subsequent to review of the financial status of RRBs by the Union Finance Minister in August, 2009, it was felt that a large number of RRBs had a low Capital to Risk weighted Assets Ratio (CRAR).
- A committee was therefore constituted in September, 2009 under the Chairmanship of Or K C Chakrabarty, Deputy Governor, RBI to analyse the financials of the RRBs and to suggest measures including re-capitalisation to bring the CRAR of RRBs to at least 9% in a sustainable manner by 2012.
- The Committee had submitted its report in May, 2010.
- The committee has inter-alia recommended the following:
- RRBs to have CRAR of at least 7% as on 31st March 2011 and at least 9% from 31st March 2012 onwards. r Recapitalisation requirement of Rs. 2,200.00 crore for
- 40 of the 82 RRBs. This amount is to be released in’ two installments in 2010-11 and 2011-12. .1
- The remaining 42 RRBs will not require any capital and will be able to maintain CRAR of at least 9% ifs on 31 st March 2012 and thereafter on their own ..
- A fund of Rs. 100 crore to be set up for training and capacity building of the RRB staff.