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The Union Cabinet today approved capital infusion in some regional rural banks to improve their capital to risk waited assets ratio. The amount of infusion is 632 crore rupees. The Cabinet approved 50 percent share of the Central government and also decided to extend the scheme of capitalization of weak regional rural banks by another two years. The regional rural banks were established in 1975 with the objective to create an alternative channel to 'cooperative credit structure' with a view to ensure sufficient institutional credit for rural and agriculture sector. The issued capital of RRBs is shared by Central Government, the concerned State Government and the sponsor bank in the proportion of 50 per cent, 15 per cent and 35 per cent, respectively. In pursuance of the recommendations of Dr. Chakrabarty, Deputy Governor, RBI on CRAR of RRBs, Government had initiated the process of recapitalization of 40 financially weak RRBs in 2009-10. The recapitalization amount has to be shared by stake holders in proportion of their share holding. The release of Central Government share is subject to release of State Government and sponsor bank share. Capitalization has been completed in 16 RRBs till the end of March, 2012.

Govt approves Rs 632 crore capital infusion in regional rural banks