RURAL ACT OF 1992

Case Overview and Summary

Summary of Republic Act No. 7353 (Rural Bank Act of 1992)

Objectives and Policy
- Promote comprehensive rural development and equitable distribution of opportunities, income, and wealth. (Section 2)
- Encourage and assist in establishing a rural banking system to provide accessible credit in rural areas on reasonable terms. (Section 2)

Establishment and Organization of Rural Banks
- Rural banks shall be organized as stock corporations. (Section 4)
- Capital stock shall be fully owned by Filipino citizens or qualified corporations/cooperatives, except for government equity investments. (Section 4)
- Board of Directors shall be Filipino citizens. (Section 5)
- Restrictions on borrowing by directors/officers from the rural bank. (Section 5)

Lending Operations and Loan Security
- Loans shall primarily cater to the credit needs of farmers, fishermen, farm families, cooperatives, and merchants. (Section 6)
- Loans may be secured by lands without Torrens titles, subject to certain conditions. (Section 6)
- Exemption from publication requirements for foreclosure of mortgages up to P100,000. (Section 6)
- Rural banks may foreclose on mortgaged lands covered by Republic Act No. 6657. (Section 6)
- Up to 15% of loanable funds may be used for small business enterprises. (Section 7)

Government Equity Investment and Support
- Government banks (e.g., Land Bank, DBP) may subscribe to rural bank capital stock equal to private shareholders' equity. (Section 4)
- Government banks may provide supplemental capital to rural banks up to private shareholders' equity. (Section 8)
- Government banks may extend loans to rural banks repayable in 10 years with concessional interest rates. (Section 14)
- Central Bank may provide loans to rural banks in emergencies or financial crises. (Section 16)

Tax Exemptions and Incentives
- Rural banks are exempt from taxes, fees, and charges (except income tax and local taxes) for 5 years from operations. (Section 15)
- Exemption from documentary stamp tax and registration fees for loans up to P50,000. (Sections 20 and 21)
- Incentives for rural bank consolidation/merger within 3 years. (Section 18)

Supervision and Regulation
- Monetary Board shall formulate rules and regulations for rural banks' establishment and operation. (Section 3)
- Central Bank shall supervise rural banks' operations, including loan procedures, accounting, audits, and management. (Section 11)
- Rural banks may be required to contribute an annual fee to the Central Bank for supervision costs. (Section 22)
- Bonding requirements for officers/employees handling funds over P5,000. (Section 23)
- Rural banks may act as agents of government banks in areas without their offices. (Section 25)

Penalties and Reporting
- Penalties for offenses by rural bank officers/employees, borrowers, and government examiners. (Sections 26 and 27)
- Prohibition on unauthorized use of the term "Rural Bank". (Section 28)
- Monetary Board shall submit an annual report to Congress on rules, regulations, and actions related to rural banks. (Section 29)