|REPUBLIC ACT NO. 720 - AN ACT
PROVIDING FOR THE CREATION, ORGANIZATION AND OPERATION OF RURAL BANKS,
AND FOR OTHER PURPOSES |
|Section 1. The
short title of this Act shall be "Rural Banks' Act". |
Sec. 2. It shall be the declared policy of Congress. – To promote and expand the rural economy in an orderly and effective manner by providing the people of the rural communities with the means of facilitating and improving their productive activities, and to encourage cooperatives. Toward this end, the Government shall encourage and assist in the establishment of a system of rural banks which will place within easy reach and access of the people credit facilities on reasonable terms. The Department of Agriculture and Natural Resources, the Department of Commerce and Industry, and other appropriate agencies or instrumentalities of the Government shall, in cooperation with the Rural Bank, provide advice on business or farm management and proper use of credit for production and marketing.
Sec. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines, shall formulate the necessary rules and regulations governing the establishment and operation of Rural Banks for the purpose of providing adequate credit facilities to small farmers and merchants, and to supervise the operation of such banks.
Sec. 4. No Rural Bank shall be operated without a Certificate of Authority of the Monetary Board of the Central Bank. Rural Banks shall be organized in the form of stock corporations. Duly established cooperatives may organized Rural Banks and/or subscribe to the shares of stock of any Rural Bank. At least sixty per cent of the capital stock of any Rural Bank shall be owned and held by citizens of the Philippines: Provided, however, That if said subscription of private shareholders to the capital stock of a Rural Bank cannot be secured or is not available, the Rehabilitation Finance Corporation, on representation of the said private shareholders and upon approval of the Monetary Board of the Central Bank shall subscribe to the capital stock of such rural bank, which shall be paid in full at the time of subscription, in an amount equal to the fully paid subscribed capital of the private shareholders: Provided, further, That such shares of stock subscribed by the Rehabilitation Finance Corporation may be sold at any time at par to private individuals who are citizens of the Philippines: Provided, finally, That in the sale of the shares of stock subscribed by the Rehabilitation Finance Corporation, the registered stockholders shall be given at least six months option within which to purchase the same in proportion to their respective holdings, but in the absence of such buyer, preference, however, shall be given to residents of the locality or province where the Rural Bank is located. All members of the Board of Directors of the Rural Banks shall be citizens of the Philippines.
Sec. 5. Loans or advances extended by Rural Banks, organized and operated under this Act, shall be primarily for the purpose of meeting the normal credit needs of any small farmer or farm family owning or cultivating, in the aggregate, not more than fifty hectares of land dedicated to agricultural production, as well as the normal credit needs of cooperatives and small merchants. For the purposes of this Act, a small merchant shall be one whose capital investment does not exceed twenty-five thousand pesos. In the granting of loans, the Rural Bank shall give preference to the application of farmers whose cash requirements are small: Provided, however, That in the case of loans secured by real estate no Torrens title shall be required.
Sec. 6. With the view to insuring balanced rural economic growth and expansion, Rural Banks may, within limits and conditions fixed by the Monetary Board, devote a portion of their loanable funds to meeting the normal credit needs of small business enterprises whose capital investment does not exceed twenty-five thousand pesos and of essential rural enterprises or industries, other than those which are strictly agricultural in nature.
Sec. 7. To provide supplemental capital to any Rural Bank until it has accumulated enough capital of its own or stimulate private investment in Rural Banks, the Rehabilitation Finance Corporation shall, upon certification of the Monetary Board of the existence of such need, subscribe to capital stock of any Rural Bank from time to time in an amount equal to but not exceeding the total equity investment of the private shareholders: Provided, however, That shares of stock issued to the Rehabilitation Finance Corporation, pursuant to this section, may at any time be paid off at par and retired in whole in part if, in the opinion of the Monetary Board, the Rural Bank has accumulated enough capital strength to permit retirement of such shares; or if an offer is received from private sources, to replace the equity investments of the Rehabilitation Finance Corporation with an equivalent investment or more in the common stock of such Bank. In case of such retirement of stock or replacement of equity investments of the Rehabilitation Finance Corporation, the registered private shareholders of the Rural Bank shall be given the right of preemption in proportion to their respective holdings.
Stock held by the Rehabilitation Finance Corporation, under the terms of this section, shall be made preferred only as to assets upon liquidation and without the power to vote and shall share in dividend distributions without preference: Provided, however, That if such stock of the Rehabilitation Finance Corporation is sold to private shareholders, the same shall thereupon have the right to vote.
Sec. 8. The Rehabilitation Finance Corporation is authorized to obtain from the "Counterpart Fund" and "Special Account" authorized under Republic Act Numbered Six hundred and four such amounts as it may require, but not more than ten million pesos, for the purpose of subscribing to the shares of stock of Rural Banks, and of granting loans to such banks as provided in section twelve of this Act. All funds obtained by the Rehabilitation Finance Corporation from the "Counterpart Fund" and "Special Account" shall constitute a revolving fund and together with the interest which will accrue thereon will be used solely as provided for in this section.
Sec. 9. Stock preferred as to assets upon liquidation shall be issued only to represent the contributions to capital stock of the Rural Bank by the Government through the Rehabilitation Finance Corporation. If there are no such public investments, only one class of stock shall be issued by any Rural Bank. The powers of the Monetary Board over Rural Banks shall extend to prescribing the amount, value and class of stock issued by any Rural Bank, organized under this Act.
Section 10. The power to supervise the operation of any Rural Bank by the Monetary Board of the Central Bank, as herein indicated, shall consist in placing limits to the maximum credited allowed any individual borrower; in prescribing the interest rate; in determining the loan period and loan procedures; in indicating the manner in which technical assistance shall be extended to Rural Banks; in imposing a uniform accounting system and manner of keeping the accounts and records of the Rural Banks; in undertaking regular credit examination of the Rural Banks; in instituting periodic surveys of loan and lending procedures, audits, test check of cash and other transactions of the Rural Banks; in conducting training courses of personnel of Rural Banks; and, in general, in supervising the business operation of the Rural Bank.
Section 11. With the written permission of the Monetary Board of the Central Bank, any Rural Bank may:
(a) accept savings and time deposits;
(b) open current or checking accounts. The Monetary Board shall determine when a Rural Bank may be authorized to open current or checking accounts;
(c) act as a correspondent for other financial institutions;
(d) act as a collection agent;
(e) rediscount with the Philippine National Bank or Rehabilitation Finance Corporation or other banks and their branches and agencies. The Central Bank shall specify the nature of paper deemed acceptable for rediscount, as well as the rediscount rate to be charged by any of these institutions.
Section 12. The Rehabilitation Finance Corporation shall, upon request of the Monetary Board, extend to a Rural Bank a loan or loans repayable in not more than ten years, with interest at the rate of two per cent per annum, against securities which may be offered by any stockholder or stockholders of the Rural Bank and which the Monetary Board may consider adequate: 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 13. 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 five members of the Monetary Board.
Section 14. All Rural Banks created and organized under the provisions of this Act, with assets not exceeding five hundred thousand pesos shall be exempt from all taxes of whatever nature a well as charges and fees required in filing articles of incorporation.
Section 15. The Central Bank of the Philippines shall extend technical assistance to any Rural Bank in the process of organization or during the course of operations whenever it is requested to do so or whenever the Monetary Board deems it necessary to preserve, protect and promote the objectives of this Act: Provided, however, That said assistance shall be without cost or obligation on the part of the Rural Bank.
Section 16. Any justice of the peace, in his capacity as notary ex officio, shall render service free of charge to any person applying for a loan not exceeding two thousand pesos from the Rural Bank either in administering the oath or in the acknowledgment of instruments relative to said loan.
Section 17. Any register of deeds shall accept for registration, free of charge, any instrument relative to a loan not exceeding two thousand pesos made to any person by the Rural Bank.
Section 18. Rural Banks organized under this Act shall be exempt from the obligation of contributing for the maintenance of the Department of Supervision and Examination provided in section twenty-eight of Republic Act Numbered Two hundred and sixty-five.
Section 19. Every individual acting as officer or employee of a Rural Bank and handling funds or securities amounting to one thousand pesos or more, in any one year, shall be covered by an adequate bond as determined by the Monetary Board; and the by-laws of the Rural Bank may also provide for bonding of other employees or officers of Rural Banks.
Sec. 20. For the purpose of carrying out the objectives of this Act, the Central Bank is authorized to require the services and facilities of any Department or instrumentality of the Government or any officer or employee of any such Department or Government instrumentality.
Sec. 21. Rural Banks organized and operated under the provisions of this Act shall act as agent of the Philippine National Bank and the Rehabilitation Finance Corporation in places where the latter have no branch or agency.
Sec. 22. A fine of not more than two thousand pesos or imprisonment for not more than one year, or both, at the discretion of the court, shall be imposed upon:
1. Any officer, employee, or agent of a Rural Bank who shall –
(a) make false entries in any bank report or statement thereby affecting the financial interest of, or causing damage to, the bank or any person; or
(b) without order of a court of competent jurisdiction disclose any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity; or
(c) accept gifts, fees or commission or any other form of remuneration in connection with the approval of a loan from said bank; or
(d) overvalue ord in overvaluing any security for the purpose of influencing in any way the action of the bank on any loan; or
(e) appear and sign as guarantor, indorser or surety for loans granted by the bank.
2. Any applicant for a loan from, or borrower of a Rural Bank who shall –
(a) misuse, misapply, or divert the proceeds of the loan obtained by him from its declared purpose; or
(b) fraudulently overvalue property offered as security for a loan from the said bank; or
(c) give out or furnish false or willful misrepresentation of material facts for the purpose of obtaining, renewing, or increasing a loan or extending the period thereof; or
(d) attempt to defraud the said bank in the event of court action to recover a loan; or
(e) offer any officer, employee or agent of a Rural Bank a gift, fee, commission or other form of compensation in order to influence such bank personnel into approving a loan application; or
(f) dispose or encumber the property or the crops offered as security for the loan.
3. Any examiner, or officer or employee of the Central Bank of the Philippines or of department, bureau, office, branch or agency of the Government who is assigned to examine, supervise, assist or rendered technical service to Rural Banks and who shall commit any of the acts enumerated in paragraph one of this section or connive ord in the commission of the same.
Sec. 23. Any justice of the peace or register of deeds who shall demand or accept, directly or indirectly, any gift, fee, commission or other form of compensation in connection with the service required to be performed by said justice of the peace as provided in section seventeen and by said register of deeds as provided in section eighteen of this Act, shall be punished by a fine of not more than one thousand pesos or by imprisonment for not more than one year, or both, at the discretion of the court.
Sec. 24. Any bank not organized under this Act and any person, association, or corporation doing the business of banking, not authorized under this Act which shall use the words "Rural Bank" as part of the name or title of such bank or of such person, association, or corporation, shall be punished by a fine of not less than fifty pesos for each day during which said words are so used.
Sec. 25. The Monetary Board of the Central Bank shall submit a report to the Congress on or before the end of each calendar year of all the rules and regulations promulgated by it in accordance with the provisions of this Act, as well as its other actuations in connection with Rural Banks, together with an explanation of its reasons therefor.
Sec. 26. If any provision or section of this Act or the application thereof to any person or circumstances, is held invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances, shall not be affected thereby.
Sec. 27. The provisions of Republic Acts Numbered Two hundred as they are applicable and not in conflict with any provision of this Act, are hereby made a part of this Act.
Sec. 28. This Act shall take effect upon its approval.
Approved: June 6, 1952