Article 161Supplement v1, p. 161

COMMERCIAL LAWS SUPPLEMENT

The director and the examiners of the department of the

Central Bank charged with the supervision of rural banks

are hereby authorized to administer oaths to any director,

officer or employee of any rural bank or to any voluntary

witness and to compel the presentation of all books,

documents, papers or records necessary in his or their

judgment to ascertain the facts relative to the true

condition of any rural bank or to any loan

Section

12.

In

addition

to the operations especially

authorized in this Act, any rural bank may:

a. Accept saving and time deposit;

b. Open current or checking accounts, provided the rural

bank has net assets of at least Five million (P5,000,000)

subject to such guidelines as may be established by the

Monetary Board:

c. Act as correspondent for other financial institutions;

d. Act as a collection agent;

e. Act as official depositary of municipal, city or provincial

funds in the municipality, city or province where it is

located, subject to such guidelines as may be established

by the Monetary Board;

f. Rediscount paper with the Philippine National Bank,

the Land Bank of the Philippines, the Development Bank

of

the Philippines, or any other banking institution,

including its branches and agencies. Said institution shall

specify

the nature of paper deemed acceptable for

rediscount, as well as the rediscount rate to be charged

by any of these institutions;

g. Offer other banking service as provided in Section 72 of

Republic Act No. 337, as amended, and

h.

Extend

financial assistance to public and private

employees in accordance with the provisions of Section 5

of Republic Act No. 3779, as amended.

With written permission of the Monetary Board of the

Central bank, any rural bank may act as trustee over

estates or properties of farmer and merchants.

Nothing in this section shall be construed as precluding a

rural bank from performing, with prior approval of the

Monetary

Board,

all

the

services

authorized

and

mortgage banks, of for commercial banks, under an

expanded banking authority as provided in Section 21-B

of the same Act.

Section

13.

Subject

to

such

guidelines

as

may

be

established by the Monetary, rural banks may invest in

equities

of

the

allied

undertakings

are

hereinafter

enumerated: Provided, That: (a) the total investment in

equities shall not exceed twenty- five percent (25%) of the

net worth of the rural bank; (b) the equity investment in

any single enterprise shall be limited to fifteen percent

(15%) of the net worth of the rural bank; and (c) the equity

investment of the rural bank in any single enterprise shall

remain a minority holding in that enterprise: Provided,

further, That equity investment shall not be permitted in

non-related activities.

Allied undertaking shall include:

a. banks, financial institutions and non-bank financial

intermediaries;

b. Warehousing and other post-harvested facilities;

c. Fertilizer and agricultural chemical and pesticides

distribution;

d. Farm equipment distribution;

e. Trucking an transportation of agricultural products;

f. Marketing and agricultural products;

g.

Leasing;

and

Other

undertakings

as

may

be

determined by the Monetary Board.

Section

14.

The

Land

Bank of the Philippines, the

Development

Bank

of

the

Philippines

or

any

government-owned

or

–controlled

bank

or

financial

institution shall, within sixty (60) days of certification of

the Monetary Board, which shall be final, extend to a rural

bank a loan or loans from time to time repayable in ten

(10) years, with concessional rates of interest, against

security which may be offered by any stockholders or

stockholders of the rural bank: Provided:

a.

That

the

Monetary

Board

is

convinced

that the

resources of the rural bank are inadequate to meet the

legitimate credit requirements of the locality wherein the

rural bank is established.;

b. That there is a dearth of private capital in the said

locality; and

c. That it is not possible for the stockholders of the rural

bank to increase the paid-up capital thereof.

Section 15. All rural banks created and organized under

the provisions of this Act shall be exempt from the

payment of all taxes, fees and charges of whatever nature

and description, except the corporate income tax and

local taxes, fees and charges, for a period of five (5) years

from the date of commencement of operations.

All rural banks in operation as of the date of approval of

this Act shall be exempt from the payment of all taxes,

fees and charges of whatsoever nature and description,

except the corporate income tax and local taxes, fees and

charges, for a period of five (5) years from the approval of

this Act.

Section 16. In an emergency or when a financial crisis is

imminent, the Central Bank may give a loan to any rural

bank against assets of the rural bank which may be

considered acceptable by a concurrent vote of at least

four (4) members of the Monetary Board.

In normal times the Central bank may rediscount against

paper evidencing a loan granted by a rural bank to any of

its customers which can be liquefied for a period of three

hundred sixty (360) days: Provided, however, That for the

purpose

of

implementing

a

nationwide

program of

agricultural and industrial development, rural banks are

hereby authorized, under such terms and conditions as

the Central bank shall prescribe, to borrow, on a medium

– or long-term basis, funds that the Central Bank or any

other government financing institution shall borrow from

the

Development

Bank

of

the

Philippines or other

international

or

foreign-lending

institutions

for

the

specific purpose of financing the abovestated agricultural

and industrial program. Repayment of loans obtained by

the

Central

Bank

of

the

Philippines

or

any

other

government

financing

institutions

from

said

foreign-lending institutions under this section shall be

guaranteed by the Republic of the Philippines.

Section

17.

Deposits

of

rural

banks

with

government-owned or –controlled financial institutions

like the Land Bank of the Philippines, the Development

Bank of the Philippines, and the Philippine national Bank

are exempted from the Single Borrower’s Limit imposed

by the General Banking Act.

In areas where there are no government banks, rural

banks may deposit in private banks more than the

amount prescribed by the Single Borrower’s Limit subject

to Monetary Board regulations.

Section 18. To encourage consolidation and mergers of

rural banks, if there are five (5) or more rural banks within

the region that merge and consolidate within three (3)

years from the enactment of this Act, the merged or

consolidated entity will be given the following incentives

for a period of seven (7) years:

a. Its deposit liabilities shall be subjected to only one-third

(1/3) of reserves normally required for rural banks;

b. Its reserve requirement can all be maintained under

interest-bearing

government

securities

but

kept

unencumbered with government financial institutions or

the Central Bank; and

c. It shall have unrestricted branching right within the

region, free from any assessment or surcharge required

in setting up a branch but under coordination with the

Central bank which will have to assess that there are

qualified personnel, control and procedures to operate

the branch.

© Compiled by RGL

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