QuestionsQuestions (Republic Act No. 7353)
RA 7353 recognizes the need to promote comprehensive rural development by attaining a more equitable distribution of opportunities, income, and wealth; sustaining increased production of goods and services for the benefit of the people; and expanding productivity to raise the quality of life, especially for the under-privileged. It encourages and assists in establishing a rural banking system to make needed credit available and readily accessible in rural areas on reasonable terms.
Section 4 provides that rural banks shall be organized in the form of stock corporations. With limited exceptions (e.g., shareholdings of corporations organized primarily to hold equities in rural banks under RA 337 as amended, and Filipino-controlled domestic banks), the capital stock must be fully owned and held directly or indirectly by citizens of the Philippines or corporations/associations/cooperatives qualified under Philippine laws.
Section 4 states that, despite contrary provisions of existing laws, stockholdings in a rural bank are exempt from any ownership ceiling for ten (10) years from the approval of the Act. This exemption requires the approval of the Monetary Board.
Under Section 4, if private subscriptions cannot be secured or are insufficient, the Land Bank of the Philippines, the Development Bank of the Philippines, or any government-owned or controlled bank or financial institution—upon representation of private shareholders and subject to the bank’s investment guidelines and upon approval of the Monetary Board—shall subscribe to the rural bank’s capital stock, paid in full at subscription.
Section 4 provides that such cooperative/corporation shall be subject to special examination and to rules and regulations as the Monetary Board may prescribe.
Under Section 5, directors/officers are prohibited from borrowing any deposits or funds of the rural bank, becoming guarantors/indorsers/sureties for loans of the bank to others, or otherwise becoming an obligor for money borrowed from or loaned by the bank, except with written approval of the majority of the directors excluding the concerned director. Violation results in immediate dismissal and penalties under Section 26.
Section 6 states that loans/advances should primarily meet the normal credit needs of farmers, fishermen or farm families owning/cultivating agricultural land, as well as normal credit needs of cooperatives and merchants. In granting loans, rural banks must give preference to applications of farmers and merchants whose cash requirements are small.
Yes. Section 6 allows loans secured by land without Torrens Title if the owner shows five (5) years or more of peaceful, continuous, uninterrupted possession in the concept of owner; or for friar lands/lands under Bureau of Lands administered by sales contracts with purchasers having paid at least five (5) years installment; and similarly for other estates under DAR or other agencies under the same sales-contract and five-year installment condition; and for homesteads/free patent lands pending issuance of titles if already approved.
Section 6 provides that foreclosure and execution involving newspaper publication requirements are exempt when the total amount of the loan excluding unpaid interest does not exceed P100,000 (or such amount as the Monetary Board may prescribe). Publication is sufficient by posting notices in conspicuous areas of the municipal building, public market, rural bank, barangay hall, and barangay public market (if any) for 60 days before auction, with proof by affidavit of the sheriff/officer.
Yes. Section 6 gives homesteader or free patent holder (and heirs) the right to redeem within one (1) year from the date of foreclosure for land not covered by a Torrens Title, or one (1) year from the date of registration of the foreclosure for land covered by a Torrens Title.
Section 6 provides that borrowers, especially mere tenants, need only to secure their loans with the produce corresponding to their share.
Section 12 lists additional authorized operations, including accepting savings and time deposits; opening current/checking accounts (condition: net assets of at least P5,000,000); acting as correspondent for other financial institutions; acting as collection agent; acting as official depositary of local funds in its location subject to Monetary Board guidelines; rediscounting paper with specified institutions; offering other banking services; and extending financial assistance to private/public employees subject to applicable law. With written permission of the Monetary Board, it may also act as trustee over estates/properties of farmers and merchants.
Section 13 allows investments in equities of allied undertakings, but subject to limits: total equity investment not exceeding 25% of net worth; investment in any single enterprise limited to 15% of net worth; and equity investment in that enterprise must be in related activities only (no non-related activities). Allied undertakings include banks/financial institutions, warehousing/post-harvest facilities, fertilizer/agrochemicals distribution, farm equipment distribution, trucking/transportation of agricultural products, marketing of agricultural products, leasing, and other undertakings determined by the Monetary Board.
Under Section 11, supervision includes placing limits on maximum credit to borrowers, prescribing interest rates, loan period/procedures, accounting system, periodic surveys/audits/test-checks, training, and general supervision of operations. It can enforce laws/rules and, upon proof that the rural bank/Board/officers are managing contrary to rules or substantially prejudicial to government, depositors, or creditors, take over management when specifically authorized by the Monetary Board after due hearing until a new board is elected and qualified.
Under Section 26, without prejudice to prosecution under other laws, the penalty is a fine of not more than P10,000 or imprisonment of not less than six (6) months but more than ten (10) years, or both, at the discretion of the court. It applies to acts such as false entries in reports affecting financial interest/damage; unauthorized disclosure of information; accepting gifts/fees/commissions related to loan approvals; overvaluing securities to influence loan decisions; acting as guarantor/indorser/surety for loans; and violating provisions of the Act.