The Union
Cabinet, chaired by the Prime Minister Shri Narendra Modi, today
approved the amendments in the Regional Rural Banks (RRBs) Act, 1976 to
enhance authorized and issued capital to strengthen their capital base
and to bring flexibility in the shareholding between Central Government,
State Government and Sponsor Bank. The term of the non-official
directors appointed by the Central Government will be fixed not
exceeding three years. The amendments will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meeting credit requirements of rural areas and the Board of RRBs will be strengthened.
Background:
Regional Rural Banks were established under Regional Rural Banks Act, 1976 (the RRB Act) to create an alternative channel to the cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector. RRBs are jointly owned by Government of India, the concerned State Government and Sponsor Banks with the issued capital shared in the proportion of 50 percent, 15 percent and 35 percent respectively. As per provisions of the Regional Rural Banks Act, 1976 the authorized capital of each RRB is Rs. five crore and the issued capital is maximum Rs one crore.