Cabinet clears recapitalisation plan for regional rural banks

The union cabinet today approved a plan for recapitalisation of regional rural banks (RRBs) to improve their capital to risk weighted assets ratio (CRAR). This would be done with support from the state governments and sponsor banks.

The first phase of the recapitalisation plan, involving a capital infusion of Rs2,200 crore, aims at raising CRAR of 40 of the 82 RRBs in the country to at least 7 per cent as of 31 March 2011 and to 9 per cent by 31 March 2012.

The amount, to be released in two installments in 2010-11 and 2011-12, will be shared by the central and state governments and sponsor banks.

The remaining 42 RRBs will not require any capital and will be able to maintain CRAR of at least 9 per cent as of 31 March 2012 and thereafter on their own, an official release said.

While the share of central government of Rs1,100 crore will be released as per the Union Budget's expenditure provisions for 2010-11 and 2011-12, the release of the amount will be contingent on proportionate release of state government and sponsor bank shares.

A capacity building fund with a corpus of Rs100 crore will also be set up for training and capacity building of the RRB staff. The training programme will be undertaken by NABARD and other reputed institutions.