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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.
How much percent share state governmnet could have in Regional rural Banks ?
10
15
35
50
65
In RRBs, 50% share shall be held by the central government, 15% by the concerned state government and 35% by the sponsor bank. The RRB amendment act 2014 has allowed the RRBs to raise their capital from sources other than the central and state governments, and sponsor banks.In such a case, the combined shareholding of the central government and the sponsor bank cannot be less than 51%. Further, if the shareholding of the state government in the RRB is reduced below 15%, the central government would need to consult the concerned state government.
By: Himani Bihagra ProfileResourcesReport error
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