Cabinet approved the continuation of recapitalization of RRB scheme

As per the scheme, the National Bank for Agriculture and Rural Development (NABARD) will identify the RRBs that require recapitalization assistance to maintain the mandatory CRAR of 9%.
Akarsh Phanindra

Updated: Mar 26,2020 11:31:20 am

Cabinet approved the continuation of recapitalization of RRB scheme

26 March 2020 Current Affairs:The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi approved to continue the process of recapitalization of Regional Rural Banks (RRBs).

Highlights:
The Cabinet approved to provide minimum regulatory capital to RRBs for another year, that is, up to 2020-21 for those RRBs which are unable to maintain minimum Capital to Risk-weighted Assets Ratio (CRAR) of 9% which was set as per the regulatory norms prescribed by the Reserve Bank of India (RBI).
The CCEA also approved the RRB's to utilize Rs.670 crore as central government share for the scheme of Recapitalization of RRBs that are subject to the condition that the release of the Central Government’s share will be contingent upon the release of the proportionate share by the sponsor banks. Earlier, it was decided that 50% of the total recapitalization support of Rs.1340 crore will be shared by the government.

Background:
RBI introduced disclosure norms for CRAR of RRBs with effect from March 2008. Based on the recommendation of Dr. K.C. Chakrabarty chaired the committee, a Scheme for Recapitalization of RRBs was approved by the Cabinet on 10 February 2011.  As per the scheme, the National Bank for Agriculture and Rural Development (NABARD) will identify the RRBs that require recapitalization assistance to maintain the mandatory CRAR of 9%. The scheme will provide recapitalization support of Rs.2,200 crore to 40 RRBs. Also, an additional amount of Rs.700 crore will be given as a contingency fund to meet the requirement of the weak RRBs, particularly in the North-Eastern and Eastern Region.
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