Regional rural banks will be able to meet the credit related needs in rural areas, approval for recapitalization: The Cabinet Committee on Economic Affairs (CCEA) under the chairmanship of Prime Minister Narendra Modi continued the process of recapitalization of Regional Rural Banks (RRBs) by providing minimum regulatory capital to RRBs for another year after 2019-20 ie by 2020-21. Has given its approval to. This would provide minimum regulatory capital to RRBs who are unable to maintain a ‘capital-risk weighted asset ratio (CRAR)’ of 9%, as indicated in the regulatory norms specified by the Reserve Bank of India.

The CCEA has also approved the use of Rs 670 crore (ie 50% of the total recapitalization support of Rs 1340 crore) as part of the central government for the recapitalization scheme of RRBs. However, there will be a condition that the Central Government share will be released only if the proportionate stake is issued by the sponsor banks.

Financially sound regional rural banks with better CRARs will actually be able to meet the credit needs in rural areas.

As per RBI guidelines, RRBs have to provide 75% of their total loans under PSL (priority sector lending). RRBs are primarily catering to the credit and banking needs of the agricultural sector and rural areas with a focus on small and marginal farmers, micro and small enterprises, rural artisans and weaker sections of society. Apart from this, RRBs also provide loans to micro / small enterprises and small entrepreneurs in rural areas. On getting recapitalization or new capital support to increase ‘CRAR’, RRBs will be able to continue to lend these categories of borrowers under their PSL target, so they will continue to support rural livelihoods.

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