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Capital base of regional rural banks raised

The Government of India is reported to have rejected the proposal of establishing Postal Bank of India, quoting the paucity of funds for subscribing to its capital. It has, however, found it expedient to enhance the authorised capital base of 56 gramin banks, though the time limit by which additional capital would be subscribed has not been specified. By amending the Regional Rural Banks Act of 1976, Government of India has raised recently the authorised capital of gramin banks from Rs.5 crore to Rs.2000 crore.  The fully paid up value of each share would be Rs.10 as against Rs.100 at present. This measure is intended to permit non-government agencies and individuals to subscribe to the share capital. At present Government of India holds 50 per cent, state government 15 per cent and the sponsoring banks 35 per cent of the total capital employed.

The total subscribed share capital of these banks, including the share capital deposits, is Rs.6367 crore as on March 2014. Since 2010, Government of India has contributed Rs.1038.14 crore to 38 gramin banks for recapitalisation. The state governments’ contribution was Rs.311.49 crore and that of sponsor banks was Rs.726.78 crore. If Government of India along with the state governments, decide to dilute shareholding from 65 per cent to 51 per cent, the volume of capital infusion required would be very huge. Shares of gramin banks may not be very attractive proposition for the general investors. Employment Stock option may be one way of filling the gap.

State governments, with 15 per cent capital participation, have been passive owners of gramin banks. These 15 percent of the shares may be offered to the public for subscribing, after the authorised capital is enhanced. A beginning in this direction can be made in the case of the bigger gramin banks, some of which have larger branch networks, compared to private sector banks of the old generation.

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