New Delhi, July 16 (IANS): The union cabinet on Thursday extended for the next three years the scheme for recapitalisation of weak regional rural banks (RRBs).

"These banks are unable to maintain minimum capital to risk weighted assets ratio (CRAR) of 9 percent. This decision will help them improve this ratio," an official release issued here said.

A strong capital structure and minimum required CRAR will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meeting the credit requirements of rural areas, it said.

Presently, there is a budget provision of Rs.15 crore for recapitalisation of RRBs. After the extension, further funds as required will be requested for in supplementary demands in the budget.

The RRBs were established under the Regional Rural Banks Act, 1976, to create an alternative channel to the cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector.

RRBs are jointly owned by the Centre, state government concerned and sponsor banks with the issued capital shared in the proportion of 50:15:35, respectively.

The cabinet meeting was chaired by Prime Minister Narendra Modi.