Important Points about RRBs and the issue of Recapitalization Establishment

    Important Points about RRBs and the issue of Recapitalization Establishment
    Important Points about RRBs and theissue of Recapitalization Establishment:
    Important points that we have to know about RRBs and the issue of Recapitalization Establishment were given here, which will be more helpful for the candidates those who are preparing for the upcoming exams.

    RRBs and the issue of Recapitalization Establishment:

    TheRegional Rural Banks (RRBs) were establishment in 1975 under the provisions of the Ordinance promulgated on 26th September, 1975 and Regional Rural Banks Act, 1976 with a view to developing the rural economy.

    The RRBs were owned by three entities with their respective shares as follows:

    ·        Central Government: 50%   State government : 15%  Sponsor bank : 35%
    CRAR:CRAR is the acronym for Capital to Risk weighted Assets Ratio, a standard metric to measure balance sheet strength of banks. Also known asCapital Adequacy Ratio,it is the ratio of a bank’s capital to its risk. National regulators track a bank’s CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements.
    ·        It is a measure of a bank’s capital. It is expressed as a percentage of a bank’s risk weighted credit exposures.
    ·        This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world.
    ·        Two types of capital are measured: tier one capital, which capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.

    Recapitalization of RRBs

    ·        With a view to bringing the CRAR to at least 9 percent, the KC Chakrabarty Committee has recommended recapitalization support to the extent of Rs. 2,200 crore to 40 RRBs across 21 States.
    ·        The recapitalization 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.
    ·        A total of Rs. 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 forther funds to the RRBs that require capital support.
    ·        Meanwhile, the Financial Ministry is gearing up to seek Parliamentary nod for additional capital infusion of about Rs. 12,000 crore inpublic 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 Rs. 11,500 crore in PSBs this fiscal, over and above the Rs. 7,800 crore earmarked in this year’s Budget.

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