File Photo: Parliament House (Reuters)
A bill to amend the Regional Rural Banks Act was passed by Parliament today, with government saying it was necessary to empower such financial institutions which are the "jewel in the crown" of the country's financial system.
The Regional Rural Banks (Amendment) Bill, 2014, which got the assent of the Rajya Sabha by voice vote today, seeks to help Regional Rural Banks (RRBs) raise their authorised capital and will enable them to mop up funds from capital market to help strengthen them.
Lok Sabha had earlier passed the Bill in December last.
Moving the bill for passage, Minister of State for Finance Jayant Sinha said 57 RRBs have been playing an important role in financial inclusion of villages, covering every district and having nearly 80,000 employees.
He said the need for amendments has been felt for some time to strengthen the RRBs for which capital is needed.
"I would call them a 'Jewel in the crown' and not a 'Diamond in the rough' as described by a member... These are a jewel in the crown, although not the entire crown," he said.
Through the amendment in the Act, the government was giving them flexibility and strengthening them, he added.
Dismissing apprehensions that the amendments are a way to privatise these banks, Mr Sinha said, "Some private player will come in to infuse capital, but there are enough safeguard in the bill."
He said under the present system, the Centre has a 50 per cent share, the sponsor Bank 35 per cent and state government 15 per cent shareholding in the RRBs. The proposed amendments will provide flexibility in this structure.
"In no case will the holdings of the Centre and Sponsor Bank be allowed to go less than 51 per cent," he said, adding "We have to have an open mind on having reduction in our capital. We have to give them the resources for financial strengthening in the financial landscape."
He said government is attempting to strengthen these banks, which play an important role in financial inclusion and will help fulfil government's attempt of providing financial inclusion to every village in the country.