Criteria for Regional Rural Banks – RBI Grade B Phase 2

Criteria for RRB's:

1. The Regional Rural Banks (RRBs) hold shares in the ratio as follows: Central Government – 50%, state government – 15% and sponsor banks – 35%

2. Capital to Risk weighted Assets Ratio (CRAR) – A Committee under the chairmanship of K.C. Chakrabarty, Deputy Governor of RBI was constituted in September 2009 to highest measure including re-capitalization of RRBs to bring the CRAR of RRBs to at least 9%, by about 2012. The committee submitted its report in May 2010. The recommendations are:

3. RRBs to have CRAR of at least 7% as of 31st March 2011 and at least 9% from 31st March 2012 onwards, recapitalization requirement of Rs. 2200 crore for 40 of the 82 RRBs. This amount is to be released in two installments in 2010-11 and 2011-12.

4. The remaining 42 RRBs will not require any capital and will be able to maintain CRR of at least 9% on 31st March 2012 and thereafter on their own.

5. A fund of Rs. 100 crore to be set up for training and capacity building of the RRB staffs.

6. The Government of India recently approved the recapitalization of RRBs in the following manner:

7. Share of Central Government, Rs. 1100 crore will be released in 2011 and 2012. Thus Government of India release will be contingent to release of share of state government and sponsoring banks.

8. A capacity building fund with a corpus of Rs. 100 crore to be set up by Government of India with NABARD towards training RRB staff.

9. Additional Amount of Rs. 700 crore as contingency fund to meet the requirements of weak RRBs.

Criteria For State / District Co-operative Banks:

1. A state co-operative banking works at Apex level (State level)

2. A Central Co-operative bank (District Co-operative Bank) works at the intermediate level (works at District level) .

3. Primary Co-operative credit societies at base level (at village level) .

4. A co-operative bank is a financial entity which belongs to its members who are the owners and customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks provide their members, banking and financial services like loans deposits, bank accounts etc.

5. Co-operative banks are owned and controlled by their members who democratically elect the Board of Directors.

6. In a Co-operative bank, yearly profit or surplus is usually allocated to constitute reserves. A part of this profit can also be distributed to the members legally.

7. RBI has extended the Off-site Surveillance System (OSS) to all non-scheduled Urban Co-operative Banks (UCBs) having deposit size of Rs. 100 crores and above.

Types of Co-operative Banks:

Primary Co-operative Credit Society:

The funds of the society are derived from the share capital and deposits of members and loans from central co-operative banks. The loans are given to its members for purchase of cattle, fodder, fertilizer, pesticides etc, in rural villages.

Central Co-operative Banks:

The state co-operative bank is a federation of central co-operative banks and acts as the watchdog of the co-operative banking structure in the state. Its funds are obtained from share capital, deposits, loans and overdrafts from the Reserve Bank of India. The state co-operative banks lend money to central co-operative banks and primary societies and not directly to farmers.

Urban Co-operative Banks:

These are primary co-operative banks located in urban and semi urban areas. They lend to small borrowers and businesses. Large co-operative banks with paid-up share capital and reserves of Rs. 1 lakh were brought under the purview of Banking Regulation Act 1949 with effect from 1st March 1966 and within the ambit of Reserve Bank’s supervision.

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