News Excerpt
The Cabinet Committee on Economic Affairs (CCEA) has given its approval for continuation of the process of recapitalization of Regional Rural Banks (RRBs) by providing minimum regulatory capital to RRBs for another year (up to 2020-21) for those RRBs which are unable to maintain minimum Capital to Risk weighted Assets Ratio (CRAR) of 9%, as per the regulatory norms prescribed by the Reserve Bank of India.

Highlights
•    The CCEA also approved utilization of Rs.670 crores as central government share for the scheme of Recapitalization of RRBs (i.e. 50% of the total recapitalization support of Rs.1340 crores).
•    The move is crucial to ensure liquidity in rural areas during the lockdown due to the COVID-19 crisis.

Cabinet Committees
    The Cabinet Committees are extra-constitutional as the Rules of Business provide for their establishment.
Capital to Risk weighted Assets Ratio (CRAR)
    Also known as Capital Adequacy Ratio.
    It is ratio of bank’s capital to its risk.
    It is usedto protect depositors and promote the stability and efficiency of financial systems around the world.
    It is decided by central banks and bank regulators.

    At present there are:
o    Appointments Committee of the Cabinet.
o    Cabinet Committee on Accommodation.
o    Cabinet Committee on Economic Affairs.
o    Cabinet Committee on Parliamentary Affairs.
o    Cabinet Committee on Political Affairs.
o    Cabinet Committee on Security.
o    Cabinet Committee on Investment and Growth.
o     Cabinet Committee on Employment & Skill Development.
    They are mostly headed by Prime Minister. Some times other cabinet minsters also acts as their chairman but in case the prime minister is member of a committee, he invariably presides over it.   
    They usually include only cabinet ministers but the non-cabinet minsters are not debarred from their membership.  

Pre-Connect
    The Regional Rural Banks (RRBs) were established in 1975 under the provisions of the Ordinance promulgated on 26th September, 1975 and Regional Rural Banks Act, 1976 on recommendation of Narasimham committee 1975.
    They are scheduled commercial banks (Government banks). The RRBs were owned by three entities i.e. Central govt., State govt. and Sponsor Bank in proportion of 50:15:35.
    They have been created with a view to serve primarily rural areas of India with basic banking and financial services.
    The area of operation of RRBs is limited to the area as notified by Government of India covering one or more districts in the State.
    On recommendation of K C Chakrabarty committee, cabinet in 2011 approved the recapitalisation of RRBs.
    Identification of RRB requiring recapitalisation is done by NABARD (National Bank for agriculture and rural development.
    The Government (to enable RRBs to minimize their overhead expenses, optimize the use of technology, enhance the capital base and area of operation and increase their exposure) has initiated structural consolidation of RRBs in three phase, thereby reducing the number of RRBs from 196 in 2005 to the present 45.
    In its 2019-20 budget, the government had earmarked Rs 236 crore for the capitalisation of RRBs.

Analytica
    Now, Regional Rural Banks with improved CRAR will enable them to meet the credit requirement in the rural areas.
    RRBs would be able to continue their lending to these categories of borrowers under their PSL target, and thus, continue to support rural livelihoods. As under RBI guidelines the RRBs have to provide 75% of their total credit under PSL.

Conclusion
This is a welcome move of recapitalization of Regional Rural Banks (RRBs) as it will support PSL and will indirectly provide credit to farmers, small scale industries, rural artisans and entrepreneurs hit by the coronavirus (COVID-19) outbreak.

Capital to Risk weighted Assets Ratio (CRAR)
    Also known as Capital Adequacy Ratio.
    It is ratio of bank’s capital to its risk.
    It is usedto protect depositors and promote the stability and efficiency of financial systems around the world.
    It is decided by central banks and bank regulators.

PEPPER IT WITH
Transaction of Business Rules, Extra Constitutional Bodies, Standing and Ad-hoc committees, Group of Minsters