Recapitalization of Regional Rural Banks approved by Union Cabinet

The Union Cabinet under the chairmanship of PM Modi on March 25, 2020, approved the recapitalization of regional rural banks (RRB) to improve the capital to risk weighted assets ratio.

Highlights

The Committee approved the continuation of recapitalization of RRBs. In order to achieve this the GoI has provided a minimum regulatory capital for another, 2020-21. The recapitalization funds are being allocated to those banks that are unable to maintain minimum CRAR (Capital to Risk weighted Assets Ratio) of 9%. The CRAR for a bank is fixed by RBI.

Benefits

An improved CRAR will help the rural banks to meet their credit requirements in rural areas. The RRBs should allocate 75% of their credit to priority sector lending. The RRBs focus on small and marginal farmers, micro and small enterprises, weaker sections of the society and rural artisans

Scheme of Recapitalization

The Scheme of Recapitalization of RRBs was launched in 2011. It was launched on the recommendation of Dr K C Chakrabarty Committee.

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