Recently, the Centre has approved a Rs. 1340-crore recapitalisation plan for Regional Rural Banks (RRBs).The move is crucial to ensure liquidity in rural areas during the lockdown due to the COVID-19 crisis.
This recapitalisation would improve their capital-to-risk weighted assets ratio (CRAR) and strengthen these institutions for providing credit in rural areas.The step will help those RRBs which are unable to maintain a minimum CRAR of 9%, as per the regulatory norms prescribed by the RBI.
The release of the Rs. 670 crore as the central share funds will be contingent upon the release of the proportionate share by the sponsor banks.
The recapitalisation process of RRBs was approved by the cabinet in 2011 based on the recommendations of a committee set up under the Chairmanship of K C Chakrabarty.
The National Bank for Agriculture and Rural Development (NABARD) identifies those RRBs, which require recapitalisation assistance to maintain the mandatory CRAR of 9% based on the CRAR position of RRBs, as on 31st March of every year.
The scheme for recapitalization of RRBs was extended up to 2019-20 in a phased manner post 2011.