 bill no 89 of 1987 the regional rural banks (amendment) bill, 1987 a billfurther to amend the regional rural banks act, 1976 be it ena~ted by parliament in the thirty-eighth yeai' of the republic of india as follows:-1 (1) this act may be called the regional rural banks (amend-short title rnent) act, 1967 and com-illcncc-5 (2) it shall eome into force on such date as the central government men: may, by notification in the official gazet,te, appoint 21 of 1976 2 in section 2 of the regional rural banks act, 1976 (hereinafter referj:ed to as the principal act), after clause (c), the following clause amendment of section 2, !' hall b~ inse,rted, namely:-10 61 of 19ri '(ea) "national bank" means the national bank for agriculture and ~ural development established under section 3 of the national bank for agriculture and rural development act, 1961;' 3 in section 3 of the principal act, for 8ub-section (3), the following sub-section shall be substituted, namely:-amendment of secrion 3 15 "(3), it shall be the duty of the sponsor bank to aid and assi~t the regional rural bank, sponsored by it, by-(a) subscribing to the share capital of such ae~onal rural bank; (b) training personnel of such regional rural bank; and (c) providing such managerial and financial assistance to such regional rural bank during the first five years of its functioning, as may be mutually agreed upon between the sponsor bank and the regional rural bank: 5 provided that the central government may, either on its own motion or on the recommendation of the national bank, extend the said period of five years by such further period, not exceeding five years at a time, subject to such conditions as it may deem fit to impose" 10-4 in section 4 of the principal act, in sub-section (1), for the words ·'reserve bank", the words "national bank" shall be substituted amendmentof section   5 in section 5 of the principal act,-amendmentllf section 5 (a) for the words "one crore of rupees, divided into one lakh", the words ''five crores of nlpee5 divided into five lakhs" shall be 15 substituted; (b) in the proviso, for the words "reserve bank", the words "national bank" shall be substituted  6 id metiea 6 of the priacipftl act,-amendment iif section 6 (a), for sub-section (1), the following sulhiectioa shan be 2() substituted, namely:-"(a) the issued capital of each be&ional rural bank shall, in the first instance, be such as may be fixed by the central govemmeat ia this beha«, but it shall ia no case be less than twentyfive iakhs of rupees or exceed one crore of rupees"~ 25 (b) in sub-section (3), fgr the words "reserve bank", the worcls "national bank" shall ~ substituted 1 in section 9 of the principal act, in sub-section (1), for clauses (a) (b) and (c), the following clauses shall be substiuted, namely:-amendment df section 9 ' (a) two directors, who are not officers of the central govern- 3<>-ment, state government, reserve bank, national bank, sponsor bank or any other bank, to be nominated by the central government; i (b) one director who is an officer of the reserve bank to be nominated by that bank; 35 (c) one director, who is an officer of the national bank, to be nominated by that bank; cd) two directors, who are officers of the sponsor bank, to be nominated by that bank; and (e) two directors, who are officers of the concerned state gov- 40 ernment, to be nominated by that government" 8 in section 11 of the principal act,-(i) in sub-section (1),-amendmentr section if (a) for the words ''the central government", the words "the sponsor bank" shall be substituted; 5 (b) the following proviso shall be inserted, namely:-"provided that no appointment of such an individual shall be made,-(a) if such an individual is an officer of the sponsor bank except after consultation with the national bank; 10 and (b) in any other case, except with the prior approval of the central government"; (ii) for sub-section (la), the following sub-section shall be substituted, namely:-15 "(la) notwithstanding anything contained in sub-section (1),-(a) the sponsor bank shall have the right to terminate the term of office of the chairman at any time before the expiry of the period specified in sub-section (1): 20 provided that no such tennination shall be made,-(a) if the chairman is an officer of the sponsor bank, except after consultation with the national bank; and (b) in any other case, except with the prior apprb-25 val of the central government: provided further that where the chairman is not an officer of the central government, state government, reserve bank," national bank, sponsor bank or any other bank, he shall be given notice of not less than three months 30 in writing or three months' salary and allowances in lieu of such notice; and (b) the chainnan shall have the right to resign his office at any time before the expiry of the period specified in sub-aection (1) by giving to the sponsor bank, notice of 35 not less than three months in writing"; (iii) in sub-section (4),-(a) for the words "the central government", the words "'nle sponsor bank" shall be substituted; (b) for the words "provided that", the following shall be  0 substituted, namely: -provided that no such removal shall be made,-(a) if the chairman is an officer of the sponsor bank except after consultation with the national bank; and , 45 (b) in any other case, except with the prior approval of the central government: (iv) in sub-section (5), for the words "the central governmen'", the words "the sponsor bank in consultation with the national bank" shall be substituted 9 in section 13 of the principal act, for sub-section (2), the following sub-section shall be substituted, namely:-amendment of section 13  (2) a director may resign his office by giving notice thereof to the authority by which he was nominated; and, on such resignation being accepted, the director shall be deemed to have vacated 5 his office" amendment df section 16 19 in section 16 of the principal act, after the words "reserve bank,", at both the places where they occur, the words "national bank," shall be inserted 11 in section 17 of the principal act, in sub-section (1) ,-10 amendment iif section 17 (a) after the words "necessary or desirable", the words "in such manner as may be prescribed" ihall be inserted; (b) in the first proviso, the words ", during the first five year!! of the functioning of a regional rural bank," shall be omitted amendmentof section 20 12 in section 20 of the principal act, in sub-section (1), for the words is "sixty days from the date of closure of its accounting year", the words "three months from the date of the closure of its accounting year, or such further period, not exceeding three months, as may be permitted by the reserve bank" shall be substituted 13 alter chapter v of the principal act, the following chapter 20 ~hall be inserted, namely:-insertion of new oiapter va,  'chapter va amalgamation m' regional rural banksamalgamation of regional rural banks 23a (1) notwithstanding anything contained in this act, if the central government, after consultation with the national bank, the 25 concerned state g,overnment and the sponsor bank, is, of the opinion that it is necessary in the public interest or in the interest of the development of the area served by any regional rural bank or in the interest of the regional rural banks themselves, that two or more regional rural banks should be amalgamated, that govern- 30 ment may, by notification in the official gazette, provide for the amalgamation of such regional rural banks (hereafter in this chapter referred to as the transferor regional rural banks) into a single regional rural bank (hereafter in this chapter referred to as the transferee regional rural bank) with such constitution, property, powers, rights, inter- 35 ests, authorities and privileges; and with such liabilities, duties and obligations, as may be specified in the notification (2) every notification issued under sub-section (1) shall indicate the date with effect from which the amalgamation shall become 40 effective (3) every notification issued under sub-se:!tion (1) may also provide for all or any of the following matters, namely:-5 14 of 1947 10 (a) the continuance in service of all the employees of the transferor regional rural banks (excepting such of them as not being workmen within the meaning of the industrial disputes act, 1947 are specifically mentioned in the notification) in the transferee regional rural bank at the same remuneration and on the same terms and conditions of service, which they were getting or as the case may be, by which they were being governed, immediately before the date on which the amalgamation takes effect; 14 of 1947 1 j 20 25 (b) notwithstanding anything contained in clause (a), where any of the employees of the transferor regional rural banks, not being workmen within the meaning of the industrial d~­putes act, 1947 are specifically mentioned in the notification, or where any employee of the transferor regional rural banks has by notice in writing given to the transferee regional rural bank at any time before the expiry of a period of three months next following the date on which the amalgamation takes effect, intimated his intention of not becoming an employee of the transferee regional rural bank, the payment to sueh employee of compensation, if any, to which he is entitled under the indmltriai disputes act, 1947, and such gratuity, provident fund and other retirement benefits ordinarily admissible to him under the rules authorisations of the concerned transferor regional rural banks !mmediately befote· that date; (c) the other terms and conditions for the amalgamation of regional rural banks; and 30 (d) the continuance by or against the transferee regional rural bank of any :pending legal proceeding by or against any transferor regional rural banks and such oonsequential, incidental and supplemental provisions, as may, in the opinion of the central government, be necessary to give effect to the amalgamation 35 (4) every notification issued under sub-section (1) shall, as soon as may be after it has been made, be laid befofe each house of parliament no!iflcalion under section 23a to be suffidcnl notice 10 ('(illcctlled 23b (1) a notification issued under sub-section (1) of section 23a shall constitute sufficient notice of the provisions thereof to all the parties concerned and shall be binding on the transferor regional rural banks and the transferee regional rural bank and to the depositot's, creditors, employees and all other persons having dealings with such banks par!ie~ (2) notwithstanding anything contained in the transier of property act, 1882 or the registration act, 1908, any notification issued under sub-section (1) of section 23a shall be sufficient conveyance, in accordance with the provisions of the notification, of the business, properties, assets and liabilities rights, interests, powers privileges, benefits and obligations of whatever nature of the transferor regional rural banks to the transferee regional rural bank (3) on and from the date on which the amalgamation takes effect under section 23a, any reference to the transferor regional rural banks in any agreement, conveyance, assurance, power of 5 attorney or any other document of whatsoever nature, shall be deemed to be a reference to the transferee regional rural bank and the rights and obligations of the transferor regional rural banks shall be deemed to be the rights and obligations of the transferee regional rural bank to the extent specified in the said amalgamation 10 cessation of busines-~ of transferor regional rural banks 23c on and from the date on which the amalgamation takes effect under section 23a, the transferor regional rural banks shall cease to carryon business, including that of making of any payment to any depositors or discharge any liability or obligation to the creditors except to the extent as may be necessary for the implementation 15 of the provisions of the said amalgamation liquid ationof regional rural banks 23d where a notification is issued for the amalgamation of regional rural banks under sub-section (1) of section 23a, the central government may, by a further notification in the official gazette, direct that on such date, as may be specified therein, the 20 trajl6feror regional rural banks, which by reason of amalgamation will cease to function, shall stand dissolved and such direction shall take effect notwithstanding anything to the contrary contained in section 26' i 14 after section 24 of the principal act, the following section shall be 25 inserted, namely:-insertion of new section 24a 10 of 1949 inspection audit and scrutiny by the sponsor bank "24a notwithstanding anything contained in section 19 and without prejudice to the provisions of section' 35 of the banking regulation act 1949, the sponsor bank shall, from time to time, monitor the progress of the regional rural banks sponsored by it and 30 cause inspection, internal audit and scrutiny to be made by one or more of its ofticers and suggest corrective measures to be taken by such regional rural bank" amendmentof section 28 15 in section 28 of ~he principal, act, in sub-seetion (2), after the words "the reserve bank", the words "or the national bank" shall be 35 inserted 16 in section 29 of the principal act,-a mendmentof section 29 (a) in sub-section (1), for the words "reserve bank", the words "national bank" shall be substituted; (b) in sub-section (2), after clause (b), the following clause shall 40 be inserted, namely:-"(ba) the manner in which the officers and other employees of the regional rural banks shall be appointed;" 17 in section 30 of the principal act, in sub-section (1), for the words "reserve bank", the words "national bank" shall be substituted 45 amendment of section 3~ the regional rural banks act, 1976 provides for the incorporation, j'egulation and winding up of regional rural banks (rrbs) with a view to developing the rural econemy by providing, for the purpose of development of agricultwre, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs 2 in the light of the experience gaiiled in the administration of the· rrbs during the last over ten years, a need was felt to amend the act - to improve the functioning of the rrbs and for strengthening their organisational structure and improving their overall c&,pabilities 3 the bill, inter alia, seeks to m~ke the following amendments as indicated below: (a) the authorised capital of the rrbs is being enhanced from rs 1 crore to rs 5 crores; (b) the issued capital of a rrb is also being enhanced which shall in the first instance, be such, as may be determined by the central government not being less than rs 25 lakhs and not more than rs 1 crore; (c) the composition of the board of directors of a rrb is being restructured under ithe ~ended provision, the central government will nominate only two non-official directors the remaining i?irectors will be the officers of the reserve bank of india, the national bank for agriculture and rural development, the sponsor bank and the state government concerned, nominated by them the chairman of the regional rural bank shall be appointed by the sponsor bank in consultation with the national bank for agriculture and rural development where he is an officer of the sponsor bank and with the prior approval of the central government where he is not an officer of the sponsor bank, instead of his being appoint-ed by the central government  (d) provision for the amalgamation of regional rural banks in certain circumstances is being provided; (e) the sponsor banks are being empowered to uj\dertake periodical inspection, internal auditing and monitoring the progress of their sponsored rrbs  4 the bill seeks to achieve the above objectsnew delhi n d tiwari 'lh€ 20th august, 1987 clause 5 of the bill seeks to amend section 5 of the act so as to increase the authorised caipital of each regional rural bank from rs 1 crore to rs 5 crores sub-clause (a) ot clause 6 of the bill seeks to amend sub--section (1) of section 6 of the act so as to provide that the issued capital 9£ each regional rural ballk shah, in the· first instance, be such as may be fixed by the central government, not being less than rs 25 lakhs and not more than rs 1 crore ' 2 since the central govemment will have to bear 50 per cent of the e'nh~d share capital of a 'regional rural bank, there will be an ~1df1thngl' non-recurring expenditure to be met out of the consolidated fund (if india tt is, however, not possible at this stage to estimate the q\lant~m o~ such ex:penditure, 3 the bill, if enacted, will n ')t involve any other expenditure of a recurril\g or i;\on-r(fc~g na1iure - , v ~ (b) not more than two directors, to be nomirated by the concerned state government; and (c) not more than three directors, to be nominated by the sponsor bank - - - - - 11 (1) the central government shall appoint as individual to be the chairman chairman of a regional rural bank and specify the period, not exceeding five years, for which such individual shall, subject to the provisions of sub-section (4), hold office as the chairman (1 a) cnotwithstanding anything contained in sub-section (1), the central government shall have the right to terminate the term of office of the chairman at any time before the expiry of the period specified under sub-section (1) by giving him notice of not less than three months in writing or three months' salary and allowanecs in lieu of such notice; and the chairman shall also have the right to relinquish his office ,at any time before the expiry of the period so specified by giving to the central government notice of not less than three months in writing ii<                                             '"                                                                                             '"                                                                                                                                                              '"                                                                                                                                                                                                                                                                                                             '"      14) the central government may, at any time, remove the chairman from office:    provided that no person shall be removed from his office, under this l'>ub-section, unless he has been given ad opportunity of showmg cause against his removal      (5) the chairman shall receive such salary and allowances and be governed by such terms and conditions of service as may be dete:mined by the central government '"                                                                                                                                                                                                                                                                                                                                        '"        13 (1)                                       '"                                                                                                                                                                                            '"                                                                                                                                                           '"                                                                                                                                                                                           '" v:lcltion of the seat of directors     (2) the chairman may resign his office by giving notice thereof in writing to the central government and a director may resign his office by giving notice thereof to the authority by which he was nominated; and, on such resigmition being accepted, the chairman or the director, as the case may be, shah be deemed to have vacated his office '"                            '"                                                          '"                                                                                                  '"                                                                                                                                               '"                                                                                                                                                                                          -     16 (1) every director and every member of a committee (other than the chairman) shall be paid such fees and allowances as may be deter-mined by the central government: fees and allowances of directors nnd members or com mittees provided that no fees shall be paid to any director, or member of a committee, if he is an officer of the central government, state government, the reserve ba?k,  sponsor bank or any other bank (2) the allowances payable to a director or a member of a committee, who is an officer of the central government, state government, reserve bank, sponsor bank or any other bank, shall be paid by the government  extracts from me regional rural banks ac'! 1976 (21 of 1976)  -  - 3 (i)    - estllblish ment and in· corpora tion of regional rural banks (3) it shall be the duty of the sponsor bank to aid and assist the regional rural bank, sponsored by it, by subsc,tibing to the share capital of such regional rural bank, recruitment and training of personnel during the first five years of the functioning of the regional rural bank and providing such managerial and financial assistance as may be mutually agreed upon between the sponsor bank and the regional rural· bank 4 (1) a regional rural bank shall have its head office at such place in the notified area as the central govei1lttlent may, after consultation with the reserve bank and the sponsor bank, specify by notification in the official gazette   - -   authorimd capital 5 the authorised capital of each regional rural bank shall be one crore of rupees, divided into one lakh of fully paid-up shares of one hundred rupees each: provided ~hat the central government may, after consultation with the reserve bank and the sponsor bank, increase or reduce such authorised capital; so, however, that the authorised capital shah not be reduced below twenty-five lakhs of ru~, and the shares shall be in all cases, fully p~id-up shares of one hundred rupees each issued capital 6 (1) the issued capital of each regional rural bank shall be twenty-five lakhs of rupees  - >ii >ii - (3) the board may, after consultation with the reserve bank the concerned state, government and the sponsor bank and with the prior approval of the central government, from time to time, increase the issued capital of the regional rural bank; and, where additional capital is issued, such capital shall also be subscribed in the same proportion as is specified in sub-section (2)   - -  - board 01 9 (1) the board of directors shall consist of the chairman appointed directors under sub-section (1) of section 11, and the followin, other members, narnely:--- (a) not more than three directors, to be nominated by the central government; l' (b) not more than two directors, to be nominated by the concerned state government; and  (c) not more than three directors, 10 be nominated by the sponsor bank - -  - - 11 (1) the central government shall appoint as individual to be the chairman chairman of a regional rural bank and specify the period, not exceeding five years, for which such individual shall, subject to the provisions of sub-bection (4), hold office as the chairman (1a) ~otwithstandjng anything contained in s\,lb-:s~otion (1), the central government shall have the right to terminate the term of office of the chairman ,at any time before the expiry of the ,period specified under sub-section (1) by giving him notice of not less than three months in writing or three months' salary and allowanecs in lieu of such notice; and the chairman shall also have· the right to relinquish his office at any time before the expiry of the period so specified by giving to the central government notice of not less than three months in writing       (4) the central government may, at any time, remove the chairman from office: provided that ~o person shall be removed from his office, under this sub-section, unless he has been given an opportunity of show1f1g cause against his removal (5) the chairman shall receive such salary and allowances and be governed by such terms and conditions of service as may be determined by the central gove,rnment     13 (1)     vac~tion of the seat (2) the chairman may resign his office by giving notice thereof in nf director!! writing to the central government and a director may resign his office by giving notice thereof to the authority by which he was nominated; and, on such resigaation being accepted, the chairman or the director, as the case may be, :;hall be deemed to have vacated his office     - - 16 (1) every director and every member of a committee (other than the chairman) shall be paid such fees and allowances as may be determined by the central government: fees and allowances of directors and members of com mittees provided that no fees shall be paid to any director, or member of a committee, if he is an officer of the central government, state government, the reserve bank, sponsor bank or any other bank (2) the allowances payable to a director or a member of a committee, who is an officer of the central government, state government, reserve bank, sponsor bank: or any other bank, shall be paid by the government  annexure extracts from the regional rural banks ac1\ 1976(21 of 1976) - - '" - '" 3 (1) '" '" - '" establish· ment and in· corpora tion of regional rural banks (3) it shall be the duty of the sponsor bank to aid and assist the regional rural bank, sponsored by it, by subs~ibing, to the share capital of, such regional rural bank, recruitment and training of personnel during the first five years of the functioning of the regional rural bank and ,providing such managerial and financial assistance as may be mutually agreed upon between the sponsor bank and the regional rural bank 4 (1) a regional rural bank shall have its head office at such place in the notified area as the central government may, after consultation with the reserve bank and the sponsor bank, specify by notification in the official gazette - '" '" '" authorimd 5 the authorised capital of each regional rural bank shall be one capital crore of rupees, divided into one lakh of fully paid-up shares of one hundred rupees each: provided 'hat the central government may, after consultation with the reserve b:mk and the sponsor bank, increase or reduce such authorised capital; so, however, that the authorised capital shall not be reduced below twenty-five lakhs of rupee6, and the shares shall be in all cases, fully paid-up shares of one hundred rupees each iuued capital 6 (1) the issued capital of each regional rural bank shall be twenty-five lakhs of rupees '" '" '" (3) the board may, after consultation with the reserve bank the concerned state, government and the sponsor bank and· with the prlor approval, of the central government, from time to time, increase the issued capital of the regional rural bank; and, where additional capital is issued, s~~h capital lihall also be subscribed in the same proportion  as is specified in sub-section (2)  '" '" - '" board of 9 (1) the board of directors shall consist of the chairman appointed directors under sub-section (1) of section 11, and the followini other members, namely:- (d) not more than three directors, to be ,namitiated 'by the central government;  a bill further to ammd the regional rural banks ad, 1978 (shori narayan d4tt tiwari, minflter oj financ4') 