Cabinet okays R632-cr capital infusion in RRBs

Written by fe Bureau | New Delhi | Updated: Jun 8 2012, 05:45am hrs
In order to improve the capital adequacy and lending capacity for the agriculture sector, the Union Cabinet on Thursday approved R632 crore capital infusion in cash-starved regional rural banks (RRBs). India has 82 RRBs and almost all of them are equipped with core banking solutions.

RRBs will get R632 crore from the central government, a senior government functionary said after the Cabinet meeting. Following recommendations of Reserve Bank deputy governor KC Chakrabarty, the government had initiated recapitalisation process in 2009-10 for 40 financially weak RRBs, which mainly provide credit to rural and agriculture sectors. However, till March 2012, capitalisation was done in 16 banks as several states did not provide their contribution. In order to complete the process of recapitalisation, the Cabinet has decided to extend the scheme by two years.

The Union Cabinet has approved the release of 50% share of the central government for recapitalisation of the remaining RRBs to improve their capital to risk weighted assets ratio (CRAR), said the official statement. The release of central government share is subject to the release of state government and sponsor bank share, it added. The capital of RRBs is shared by centre, states and the sponsor bank in the ratio of 50%, 15% and 35% respectively.