Big decision by Modi Government! Allows Rs 670 crore support to RRBs for credit requirements

In a bid to equip India's Regional Rural Banks (RRBs) to meet the credit requirement of these areas, the Narendra Modi Government has allowed RRBs to utilise Rs 670 crore worth Central Government shares. The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi gave its approval on 25th March for the same. IT also allowed the continuation of the process of recapitalisation of RRBs by providing minimum regulatory capital to RRBs for another year beyond 2019-20. That means up to 2020-21 for those RRBs, which are unable to maintain minimum Capital to Risk-weighted Assets Ratio (CRAR) of 9 per cent, as per the regulatory norms prescribed by the Reserve Bank of India.

The CCEA informed about the decision in a written press statement citing, "The CCEA has approved the utilisation of Rs 670 crore as central government share for the scheme of Recapitalization of RRBs (i.e. 50 per cent of the total recapitalization support of Rs 1340 crore), subject to the condition that the release of Central Government’s share will be contingent upon the release of the proportionate share by the sponsor banks."

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The CCEA press statement went on to add that a financially stronger and robust Regional Rural Banks with improved CRAR will enable RRBs to meet the credit requirement in the rural areas.

As per RBI guidelines, the RRBs have to provide 75 per cent of their total credit under PSL (Priority Sector Lending). RRBs are primarily catering to the credit and banking requirements of the agriculture sector and rural areas with a focus on small and marginal farmers, micro & small enterprises, rural artisans and weaker sections of the society. In addition, RRBs also provide lending to micro/small enterprises and small entrepreneurs in rural areas. With the recapitalization support to augment CRAR, RRBs would be able to continue their lending to these categories of borrowers under their PSL target, and thus, continue to support rural livelihoods.