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MoF's Guidelines to RRBs

Published on September 16, 2022
Current Context: The Ministry of Finance issued guidelines to the Regional Rural Banks (RRBs) to raise capital through Initial Public Offering (IPO) and Rights Issue.
MoF's Guidelines to RRBs
  • These guidelines aim to direct the RRBs to acquire capital through issuing rights, private placements with chosen investors, viz. large banks and insurance firms, and through IPOs.
  • The guidelines recommended that RRBs should first issue bonus shares which can be later followed by the issuance of IPOs.
  • According to the guidelines, RRBs that are planning to make IPOs must have at least Rs 300 crore of net worth for the previous three years.
  • It mentioned that the Capital Adequacy Ratio (CAR) for these banks must be above 9%, which is the minimum regulatory level.
  • It also said that "Rights Issue" must be done in consultation with sponsor banks and merchant bankers.
  • RRBs are scheduled commercial banks which are owned jointly by the Government of India, any Nationalized Bank (aka Sponsor Bank), and respective State Governments in the ratio of 50%:35%:15%. The objective of the RRBs is to enhance financial inclusion in rural areas. The RRB was founded in 1975 under the Ministry of Finance.
  • A rights issue is a dividend of subscription rights made to the existing shareholders to purchase additional new shares in the company.


Q.1 Recently the MoF issued guidelines to raise capital through IPOs and Rights Issues to?
a. RRBs
b. NBFCs
c. SFBs

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