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News
- Regional Rural Banks(RRB) are facing capital crunch because of worsening balance sheets of sponsor banks and the apathy of Central and State governments.
Important Facts
- RRBs were introduced in 1975 as a low-cost model to ensure credit availability to rural population.
- In past RRBs have been able to meet rural credit-delivery targets but these days they are facing problems in raising capital which is affecting their functioning.
- Raising capital from the market would hurt their low cost functioning.
Consolidation of RRBs
- First round of consolidation of RRBs was done in 2004-05.
- The second round was done in 2011-12 and the number of RRBs was declined from 196 to 56.
- The present government is thinking of third round of consolidation to enhance their capital base and to increase rural lending.
NABARD’s suggestion: extension of recapitalization support to RRBs and the capital raising by strong RRbs.
