With an aim to strengthen Regional Rural Banks (RRBs) lending capacity, the government has approved extension of recapitalisation scheme for RRBs for next three years up to 2019-20. This will enable the RRBs to maintain the minimum prescribed Capital to Risk Weighted Assets Ratio (CRAR) of 9 per cent. A strong capital structure and minimum required level of CRAR will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meeting the credit requirements of rural areas.
The scheme started in 2010-11 and was extended twice in 2012-13 and 2015-16. The last extension was up to March, 2017. A total of Rs 1,107.20 crore, as government’s share, out of Rs 1,450 crore, has been released to RRBs till March 2017. The remaining Rs 342.80 crore will be utilised to provide recapitalisation support to RRBs whose Capital to CRAR is below 9 per cent, during 2017-18, 2018-19 and 2019-20. There were 56 functioning RRBs as of March, 2017 and had extended credit of Rs 2,28,599 crore.
RRBs were set up with the objective to provide credit and other facilities, especially to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in rural areas. They are jointly owned by the Centre, 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.