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Cabinet Committee has approved the recapitalization of RRBs to improve their Capital to Risk-Weighted Assets Ratio

Cabinet Committee has approved the recapitalization of RRBs to improve their Capital to Risk-Weighted Assets Ratio

The Cabinet Committee on Economic Affairs(CCEA)under the chairmanship of Prime Minister Shri Narendra Modi gave its assent for the continuation of the process of recapitalization of Regional Rural Banks (RRBs). 

Key Points:

  • Minimum regulatory capital has been provided to RRBs till 2020-21, which are not able to keep up a minimal Capital to Risk-weighted Assets Ratio (CRAR) of 9 per cent.
  • The utilization of Rs.670 crore (i.e. 50% of the total recapitalization support of Rs.1340 crore) has also been approved from the central government share for the scheme of Recapitalization of RRBs upon the condition of release of proportionate share by the sponsor banks.
  • This will lead to more reliable and financially robust RRBs which can meet credit requirements of Rural Banks.
  • As per the guidelines given by the Reserve Bank of India, RRBs have to provide 75 per cent of their total credit under Priority Sector Lending(PSL). 
  • RRBs primarily provide credit and banking requirements to the rural areas and agriculture sector and keeping the small and marginal farmers, micro & small enterprises, rural artisans and weaker sections of the society at the centre. 
  • RRBs will also provide loan to the micro and small enterprises and small entrepreneurs in rural areas. 
  • After the Recapitalization support to augment CRAR, RRBs will be able to continue providing loans to borrowers under these categories as per the PSL target.

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