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The central government has infused ₹670 crore to the Regional Rural Banks (RRBs) on the backdrop of such banks assuming significance in facilitating agriculture finance during the coronavirus crisis.
The Regional Rural Banks (RRBs) were established to cater to the commercial needs of rural areas. It had been set up to provide a number of services for the development of the rural economy including industrial, credit to small farmers, agricultural labourers and artisans.
Additionally, RRBs also provide lending to micro/small enterprises and small entrepreneurs in rural areas. With the recapitalisation support to augment CRAR, RRBs will be able to continue their lending to such borrowers thereby sustaining rural livelihood.
According to a report by Bloomberg, out of the 43 RRBs, about one-third from north-eastern and eastern regions are experiencing losses and they needed funds to meet regulatory capital requirement of 9%.
The central government, respective state governments, and the sponsor banks provide capital to these banks in the ratio 50:15:35 to enable them to meet the regulatory requirement of capital to risk-weighted assets ratio.
This round of infusion would take care of capital needs till March 31, 2021, sources added.
As per the data published by National Bank for Agriculture and Rural Development, RRBs as an entity reported a net loss of ₹2,206 crore in the fiscal year ended March 31, 2020, as against ₹652-crore net loss in FY19.
Gross non-performing assets as a percentage of gross loans outstanding of RRBs marginally declined to 10% per cent as on March 31, 2019, the data revealed.
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