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THE REGIONAL RURAL BANKS ACT, 1976

Title : THE REGIONAL RURAL BANKS ACT, 1976

Year : 1976



(1) Subject to the provisions of this Act, the general superintendence, direction and management of the affairs and business of a Regional Rural Bank shall vest in a Board of directors who may exercise all the powers and discharge all the functions which may be exercised or discharged by the Regional Rural Bank.

(2) In discharging its functions, the Board shall act on business principles and shall have due regard to public interest.



(1) The Board of directors shall consist of the Chairman appointed under sub-section (1) of section 11, and the following other members, namely.-

1*[(a) Two directors, who are not officers of the Central Government, State Government, Reserve Bank, National Bank, Sponsor Bank or any other bank, to be nominated by the Central Government;

2*[Provided that no person shall be nominated as a director, if he is already a director on the Board of any other Regional Rural Bank;]

(b) One director, who is an officer of the Reserve Bank, to be nominated by that Bank;

(c) One director, who is an officer of the National Bank, to be nominated by that Bank;

(d) 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 Government, to be nominated by that Government.]

2*[(f) Such number of directors elected by the shareholders other than the directors nominated by the Central Government, the State Government, the Sponsor Bank and other institutions owned or controlled by the Central Government or the State Government, whose names are entered in the register of shareholders of the Regional Rural Bank at least ninety days before the date of the meeting in which the election of directors takes place on the following basis, namely:-

(i) Where the total amount of equity share capital issued to such shareholders is ten per cent. or less of the total issued equity capital, one director shall be elected from such shareholders;

(ii) Where the total amount of equity share capital issued to such shareholders is more than ten per cent. but less than twenty-five per cent. of the total issued equity capital, two directors shall be elected from the shareholders including the shareholders referred to in sub-clause (i);

(iii) Where the total amount of equity share capital issued to such shareholders is twenty-five per cent. or more of the total issued equity capital, three directors shall be elected from the shareholders including shareholders referred to in sub-clauses (i) and (ii).]

(2) The Central Government may increase the number of members of the Board; so, however, that the number of directors does not exceed fifteen in the aggregate and also prescribe the manner in which the additional number may be filled in.

2*[(3) The Central Government may appoint an officer of the Central Government on the Board of Regional Rural Banks, if it considers necessary for the purposes of effective functioning of the Regional Rural Banks.]

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1. Substituted for clauses (a), (b) and (c) by Act 1 of 1988, w.e.f. 28-9-l'988, which earlier read as follows:

"(a) Not more than three Directors, to be nominated by the Central Government;

(b) Not more than two Directors, to be nominated by the concerned State Government; and (c) not more than three Directors, to be nominated by the Sponsor Bank".

2. Inserted by the Payment and Settlement Systems (Amendment) Act, 2015.
 
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A director nominated under clause (a) of sub-section (1) of section 9 shall hold office during the pleasure of the Central Government and for such term, not exceeding three years, from the date on which he assumes his office, as the Central Government may specify at the time of his nomination and shall be eligible for renomination:

Provided that no such director shall hold office either continuously or intermittently for a period exceeding six years.]

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1. Substituted by the Payment and Settlement Systems (Amendment) Act, 2015 for the following :-

"10. Term of office of director.-

A director (other than the Chairman) shall hold office for such period not exceeding two years, from the date when he assumes office, as the authority nominating him may specify at the time when the nomination is made, and may, on the expiry of the said period, continue to hold office until his successor has been nominated and shall also be eligible for re-nomination."

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(1) The 1*[Sponsor Bank] shall appoint an individual to be the 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:

2*[Provided that no appointment of such an individual shall be made,-

(a) If such individual is an officer of the Sponsor Bank, except after consultation with the National Bank; and

(b) In any other case, except with the prior approval of the Central Government].

3*[(1A) 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):

Provided that no such termination shall be made,-

(i) If the Chairman is an officer of the Sponsor Bank, except after consultation with the National Bank; and

(ii) In any other case, except with the prior approval 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 in writing or three months' salary and allowances in lieu of such notice; and

(b) The Chairman shall have the right to resign his office at any time before the expiry of the period specified in sub-section (1) by giving to the Sponsor Bank, notice of not less than three months in writing.]

(2) The individual, appointed as a Chairman under sub-section (1), shall, on the expiry of the period specified under that sub-section, be eligible for re-appointment.

(3) The Chairman shall devote his whole time to the affairs of the Regional Rural Bank and shall have, subject to the superintendence, control and direction of the Board, the management of the whole of the affairs of the Regional Rural Bank.

4*[(4) 5*[The Sponsor Bank] may, at any time, remove the Chairman from office:

6*[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

(b) In any other case, except with the prior approval of the Central Government:

Provided further that] no person shall be removed from his office, under this sub-section, unless he has been given an opportunity of showing 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 7*[the Sponsor Bank in consultation with the National Bank].

(6) If the Chairman is, by infirmity or otherwise, rendered incapable of carrying out his duties or is absent, on leave or otherwise, in circumstances not involving the vacation of office, the Central Government may appoint another individual to act as the Chairman during the absence of the first-mentioned Chairman.

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1. Substituted for "The Central Government" by Act 1 of 1988 w.e.f. 28-9-1988.

2. Inserted by Act 1 of 1988, w.e.f. 28-9-1988.

3. Substituted for sub-section (1-A) by Act 1 of 1988, w.e.f. 28-9-1988, which earlier read as follows:

"(1-A) Notwithstanding 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 (l) by giving him notice of not Ý less than three months in writing or three months salary and allowances 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. Substituted by Act 73 of 1976, w.e.f. 11-6-1976.

5. Substituted for "The Central Government" by Act 1 of 1988, w.e.f. 28-9-1988.

6. Substituted for "Provided that" by Act 1 of 1988, w.e.f. 28-9-1988.

7. Substituted for "The Central Government" by Act 1 of 1988, w.e.f. 28-9-1988.

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A person shall be disqualified for being appointed or, as the case may be, nominated as, and for being, a director, if he-

(a) Is, or, at any time has been, adjudged insolvent or has suspended payment of his debt or has compounded with his creditors, or

(b) Is of unsound mind and stands so declared by a competent court, or

(c) Is or has been, convicted of an offence which, in the opinion of the Central Government, involves moral turpitude.



(1) If a director-

(a) Becomes subject to any disqualification specified in Section 12, or

(b) Is absent without leave of the Board for more than three consecutive meetings thereof, his seat shall thereupon become vacant.

1*[(2) A director may resign his office by giving notice thereof in writing to the authority by which he was nominated; and, on such resignation being accepted, the director shall be deemed to have vacated his office.]

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1. Substituted for sub-section(2) by Act 1 of 1988, w.e.f. 28-9-1988, which earlier read as under:

"(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 resignation being accepted, the Chairman or the Director, as the case may be, shall be deemed to have vacated his office".

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(1) The Board of directors of a Regional Rural Bank shall meet at such time and place and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.

(2) The Chairman of the Regional Rural Bank shall preside over every meeting of the Board, and, in his absence, such director as the Chairman may generally, or in relation to any particular meeting, authorise in this behalf shall preside; and, in the absence of both the Chairman and the director so authorised, the directors present at the meeting shall elect one from among themselves to preside over the meeting.

Explanation.-For the purposes of this sub-section, "absence" from a meeting means non-attendance for any reason whatsoever at the meeting, or any part of the meeting during which any business is transacted.

(3) All questions at a meeting of the Board shall be decided by a majority of the votes of the directors present and voting; and, in case of equality of votes, the person presiding shall have a second or casting vote.

(4) No director shall, as a director, take part in the discussion of, or vote on, any contract, loan, arrangement or proposal, into or to be entered into, by or on behalf of the Regional Rural Bank, if he is, in any way, whether directly or indirectly, interested in the contract, loan, arrangement or proposal and, where a director is interested in any such matter, he shall, at the earliest possible opportunity, disclose to the Board the nature of his interest in such contract, loan, arrangement or proposal, and where he does so, his presence at the meeting shall not count for the purpose of forming any quorum at the time of any such discussion or vote, and if he does vote, his vote shall be void:

Provided that nothing contained in this sub-section shall apply to such director by reason only of his being-

(i) A shareholder (other than a director) holding not more than two per cent of the paid-up capital in any public company within the meaning of the Companies Act, 1956 (1 of 1956), or any corporation established by or under any law for the time being in force in India or any co-operative society, with which the Regional Rural Bank has entered into, or proposes to enter into, any contract, loan, arrangement or proposal; or

(ii) A director of the Regional Rural Bank as such.



The Board may constitute such committees, whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons, as it may think fit, for such purpose as it may decide.



(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:

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, 1*[National 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 1[National Bank] Sponsor Bank or any other bank, shall be paid by the Government or bank by which such officer is employed; and the allowances and fees payable to any other director or member of a committee shall be payable by the concerned Regional Rural Bank.

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1. Inserted by Act 1 of 1988, w.e.f. 28-9-1988.

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(1) A Regional Rural Bank may appoint such number of officers and other employees as it may consider necessary or desirable 1*[in such manner as may be prescribed] for the efficient performance of its functions and may determine the terms and conditions of their appointment and service:

Provided that it shall be lawful for a Sponsor Bank, if requested so to do by a Regional Rural Bank sponsored by it, to send, 2[***] such number of officers or other employees on deputation to the Regional Rural Bank as may be necessary or desirable for the efficient performance of its functions:

Provided further that the remuneration of officers and other employees appointed by a Regional Rural Bank shall be such as may be determined by the Central Government, and, in determining such remuneration, the Central Government shall have due regard to the salary structure of the employees of the State Government and the local authorities of comparable level and status in the notified area.

(2) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being in force, no award, judgment, decree, decision or order of any industrial tribunal, court or other authority, made before the commencement of this Act, shall apply to the terms and conditions in relation to the persons appointed by a Regional Rural Bank.

(3) The officers and other employees of a Regional Rural Bank shall exercise such powers and perform such duties as may be entrusted or delegated to them by the Board.

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1. Inserted by Ibid.

2. The words "during the first five years of the functioning of a Regional Rural Bank" omitted by Act 1 of 1988, w.e.f 28-9-1988.

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Last updated on August, 2016

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