The Union Cabinet has extended by three years the validity of the recapitalisation scheme for weak regional rural banks (RRBs). The scheme, which was earlier valid up to March 31, 2014, has been extended up to 2016-17 to help RRBs improve their capital-to-risk-weighted assets ratio (CRAR).

The minimum CRAR stipulated for RRBs stood at 9 per cent and several of these banks are unable to maintain this level.

With a view to bringing the CRAR to at least 9 per cent, the KC Chakrabarty Committee has recommended recapitalisation support to the extent of ₹2,200 crore to 40 RRBs across 21 States.

The recapitalisation process had started in 2010-11. The share of the Centre in respect of some RRBs could not be released in the absence of the release of the share of State Governments. Therefore, the scheme was extended to March 31, 2014.

Total funds released A total of ₹1,087 crore had been released as on March 31, 2014, to 39 RRBs, including Central Madhya Pradesh Gramin Bank.

The Centre is now widely expected to go in for Supplementary Demand for Grants to provide further funds to the RRBs that require capital support.

Meanwhile, the Finance Ministry is gearing up to seek Parliamentary nod for additional capital infusion of about ₹12,000 crore in public sector banks (PSBs), which is also expected to be done through Supplementary Demand for Grants in the upcoming Monsoon session of Parliament.

Finance Secretary Rajiv Mehrishi had recently said that the Centre was likely to infuse additional capital to the tune of ₹11,500 crore in PSBs this fiscal, over and above the ₹7,800 crore earmarked in this year’s Budget. Finance Minister Arun Jaitley had last month assured Chief Executives of PSBs that the Centre would take steps to provide capital above the amount specified in the Budget.

srivats.kr@thehindu.co.in

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