EIGHTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
Second Regular Session 
)
SENATE
Senate Bill No. 2225
■i- , " 
pi i!)f f, ■ -.'i '.n'
*21 MAY 25 AlO 26
m.i:\ :u I'V.^
Introduced by Senator Juan Miguel F. Zubiri
AN ACT
STRENGTHENING RURAL BANKS IN THE PHILIPPINES AMENDING 
FURTHER FOR THE PURPOSE REPUBLIC ACT NO. 7353, OTHERWISE 
KNOWN AS THE RURAL BANKS ACT OF 1992, AS AMENDED
EXPLANATORY NOTE
As mandated in Republic Act No. 7353 or the Rural Banks Act of 1992, the State 
recognizes the role of the rural banking system in attaining comprehensive and 
inclusive rural development by making credit available and readily accessible to 
the underserved, unserved and unbanked sectors of the economy, such as 
agricultural and rural workers.
With the rural banks' strong links to rural communities, they are in a position to 
effectively connect with and provide the appropriate financial products and 
services as they are more familiar with the needs of these communities.
This bill, thus, seeks to further strengthen the rural banking system by 
mandating the Landbank of the Philippines, the Development Bank of the 
Philippines, and other government-owned and controlled banks and financial 
institutions to subscribe to the capital stock of rural banks that are in need of 
funds. This will hopefully expand the market reach of rural banks to the 499 
unbanked cities and municipalities1 in the country to better serve farmers, 
fisherfolks, agricultural and other rural workers, and even our micro 
entrepreneurs.
In view of the foregoing, the passage of this bill is earnestly sought.
MIGUEL F. ZUBIRI
1 https://www.bsp.gov.ph/Lists/Directories/Attachments/10/unbanked.pdf


EIGHTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
Second Regular Session 
)
.. -•Ovriirc Di t!;i' 
i
SENATE
Senate Bill No. 2225
71 HUY 25 A10 76
WYVcA ...
Introduced by Senator Juan Miguel F. Zubiri
AN ACT
STRENGTHENING RURAL BANKS IN THE PHILIPPINES AMENDING 
FURTHER FOR THE PURPOSE REPUBLIC ACT NO. 7353, OTHERWISE 
KNOWN AS THE RURAL BANKS ACT OF 1992, AS AMENDED
Be it enacted by the Senate and House of Representatives of the Phiiippines in 
Congress assembied:
1 
SECTION 1. Title. This Act shall be known as the "Rurai Banking Act of2021".
2 
SEC. 2. Declaration of Policy - The State hereby recognizes the need to
3 
promote comprehensive local community development across the country with
4 
the end in view of attaining equitable distribution of opportunities, income and
5 
wealth, a sustained increase in the amount of goods and services produced by
6 
local communities and in expanding productivity as a key objective to improve
7 
the quality of life for all, especially the underprivileged.
8 
Towards these ends, the State hereby encourages and assists in the
9 
establishment of rural banking system and the operation of rural banks, being
10 
one of the channels for financial inclusion in recognition of their long standing
11 
contribution In the pursuit of making financial services accessible to all individuals
12 
and business entities.
13 
SEC. 3. Regulatory and Supervisory Powers of the Monetary Board - In
14 
furtherance of this policy, the Monetary Board of the Bangko Sentral ng Pilipinas
15 
(BSP) shall formulate the necessary rules and regulations governing the
16 
establishment, supervision, and operation of rural banks to ensure that rural
17 
banks operate in a safe and sound manner in the performance of their mandate.
18 
SEC. 4. Organization - Rural banks shall be organized in the form of stock
19 
corporations, and no rural bank shall be operated without a certificate of
20 
authority from the BSP.
21 
Duly established cooperatives and corporations primarily organized to hold
22 
equities in rural banks may organize a rural bank and/or subscribe to the shares
23 
of stock of any rural bank; Provided, that a cooperative or corporation owning or
24 
controlling the whole or majority of the voting stock of the rural bank shall be
25 
subject to special examination and to such rules and regulations as the Monetary
26 
Board may prescribe.


1 
SEC. 5. Ownership - No less than forty percent (40%) of the voting stocks of a
2 
rural bank shall be owned by citizens of the Philippines or corporations or
3 
associations organized under the laws of the Philippines at least sixty percent
4 
(60%) of whose capital is owned by such citizens. Non-Filipino citizens may own,
5 
acquire or purchase up to sixty percent (60%) of the voting stocks in a rural
6 
bank. The percentage of foreign-owned voting stocks shall be determined by the
7 
citizenship of the individual stockholders in that rural bank. The citizenship of the
8 
corporation which is a stockholder in a rural bank shall follow the citizenship of
9 
the controlling stockholders of the corporation, irrespective of the place of
10 
incorporation.
11 
SEC. 6. Subscription by Government-Owned or -Controlled Bank or
12 
Financial Institution - The following rules on subscription shall apply;
13 
(a) If subscription of a private shareholders to the capital stock of a rural
14 
bank cannot be secured or is not available, or insufficient to meet the
15 
normal credit needs of the locality, the Land Bank of the Philippines (LBP),
16 
the Development Bank of the Philippines (DBP), or any government-
17 
owned or controlled bank or financial institution, on representation of the
18 
said private shareholders but subject to the investment guidelines, policies
19 
and procedures of the bank or financial institution and upon approval of
20 
the Monetary Board of the BSP, shall subscribe to the capital stock of such
21 
rural bank, which shall be paid in full at the time of subscription, in an
22 
amount equal to the fully paid subscribed and unimpaired capital of the
23 
private stockholders or such amount as the Monetary Board may prescribe
24 
as may be necessary to promote and expand rural economic development.
25 
(b)To provide supplemental capital to any rural bank until it has
26 
accumulated enough capital of its own or stimulate private investments in
27 
rural banks, and subject to the investment guidelines, policies and
28 
procedures of the bank or financial institution, the LBP, the DBP or any
29 
government-owned or -controlled bank or financial institution may
30 
subscribe to the capital stock of any rural bank from time to time in an
31 
amount equal to the total equity investment of the private shareholders
32 
which shall be paid in full at the time of the subscription or such amount
33 
as may be necessary to promote and expand rural economic development.
34 
Provided, however, that shares of stock issued to the LBP, the DBP or any
35 
government-owned or controlled bank or financial institution, may, pursuant to
36 
this Section, at any time, be paid off at par and retired in whole or in part if the
37 
rural bank has accumulated enough capital strength to permit retirement of such
38 
shares, or if an offer is received from private sources to replace the equity
39 
investment of the LBP, the DBP or any government- owned or -controlled bank
40 
or financial institution.
41 
Provided, further, that such shares of stock subscribed by the LBP, the DBP or
42 
any government-owned or controlled bank or financial institution may be sold at
43 
adjusted book value to qualified individuals and juridical entities, subject to the
44 
provisions of Section 25-A of Republic Act No. 7653, as amended.
45 
Provided, finally, that in the sale of shares of stock subscribed by the LBP, the
46 
DBP or any government-owned or controlled bank or financial institution,
47 
preference, shall be given to residents and juridical entities of the locality or
48 
province where rural bank is located.


1 
In case of retirement of stock, replacement of equity investments of the LBP, the
2 
DBP or of any government- owned or -controiled bank or financial institution, the
3 
registered private shareholders of the rural bank shall have the right of
4 
preemption within one (1) year from the date of offer in proportion to their
5 
respective holdings.
6 
SEC. 7. Board of Directors - Non-Filipino citizens may become members of the
7 
board of directors of a rural bank but their participation in the board shall be
8 
limited to their proportionate share in the equity of the rural bank: Provided,
9 
however, that at least one (1) independent director shall be elected to the board
10 
of directors, unless otherwise prescribed by the Monetary Board of the BSP.
11 
SEC. 8. Directors and Officers - No director or officer of any rural bank shall,
12 
either directly or indirectly, for himself or as the representative or agent of
13 
another, borrow any of the deposits or funds of such banks, nor shall he become
14 
a guarantor, endorser, or surety for loans from such bank to others, or in any
15 
manner be an obligor for money borrowed from the bank or loaned by it except
16 
when it is with the written approval of the majority of the directors of the bank,
17 
excluding the director concerned. Any such approval shall be entered upon the
18 
records of the corporation and a copy of such entry shall be transmitted
19 
forthwith to the appropriate supervising department of the BSP.
20 
After due notice to the board of directors of the bank, the office of any bank
21 
director or officer who violates the provisions of this section may be declared
22 
vacant and the director or officer shall be subject to the penal provisions under
23 
Section 23 of this Act.
24 
SEC. 9. Restrictions on Bank Exposures to Directors, Officers and their
25 
Related Interests - The Monetary Board may regulate the amount of loans,
26 
credit accommodations and guarantees that may be extended, directly or
27 
indirectly, by the rural bank to its directors, officers, stockholders and their
28 
related interests.
29 
However, the outstanding loans, credit accommodations and guarantees which a
30 
rural bank may extend to each of its stockholders, directors, or officers and their
31 
related interests shall be limited to an amount equivalent to the respective
32 
unimpaired outstanding deposits and book value of the paid-in capital
33 
contributions in the bank.
34 
SEC. 10. Loans and Credit Accommodations Against Real Estate - Loans
35 
or advances extended by rural banks shall be prirriarily for the purpose of
36 
meeting the credit needs of farmers, fishermen and farm families. For this
37 
purpose, rural banks may accept the following as collateral:
38 
(1) Lands without Torrens Title where the owner of private property can show
39 
five (5) years or more of peaceful, continuous and uninterrupted possession
40 
in concept of owner; or
41 
(2) Portions of friar land estates or other lands administered by the Bureau of
42 
Lands that are covered by sales contracts and the purchasers have paid at
43 
least five (5) years installment thereon, without the necessity of prior
44 
approval and consent by the director of lands, or of portions of other estates
45 
under the administration of the Department of Agrarian Reform (DAR) or
46 
other governmental agency which are likewise covered by sales contracts


1 
and the purchasers have paid at least five (5) years instalment thereon,
2 
without the necessity of prior approval and consent of the DAR or
3 
corresponding governmental agency; or
4 
(3) Homestead tax declarations or free patent lands pending the issuance of
5 
titles but already approved, the provisions of any law or regulations to the
6 
contrary notwithstanding. Provided, that when the corresponding titles are
7 
issued, the same shall be delivered to the register of deeds of the province
8 
where such lands are situated for the annotation of the encumbrance.
9 
SEC. 11. Loans and Credit Accommodation on the Security of Unissued
10 
Homestead or Free Patent - In the case of lands pending issuance of
11 
homestead tax declarations or free patent titles, copies of the notices for the
12 
presentation of the final proof shall be furnished the creditor rural bank and, if
13 
the borrower applicants fail to present the final proof within thirty (30) days from
14 
date of notice, the creditor rural bank may do so for them at their expense.
15 
Provided, however, that the loan applicant using unissued homestead or free
16 
patent as security must show proof that he has already made improvements on
17 
the land and the loan applied for is to be used for further development of the
18 
same or for other productive economic activities. Provided, further, that the
19 
responsibility for the appraisal and verification of the status of a land shall be
20 
incumbent upon the rural bank; and any loan granted on any land which shall be
21 
found later to be within the forest zone shall be for the sole account of the rural
22 
bank.
23 
SEC. 12. Loans and other Credit Accommodations on Security of Farm
24 
Produce - Borrowers, especially those who are mere tenants, can secure their
25 
loans with the produce corresponding to their share.
26 
SEC. 13. Foreclosure of Mortgages - The foreclosure of mortgages covering
27 
loans granted by rural banks and executions of judgment thereon involving real
28 
properties levied upon by sheriff shall be exempt from the publications in
29 
newspapers as required by law where the total amount of loan, excluding
30 
interests due and unpaid, does not exceed one million pesos (P1,000,000.00) or
31 
such amount as the Monetary Board may prescribe by taking into account
32 
prevailing economic conditions.
33 
It shall be deemed sufficient publication in such cases where the notices of
34 
foreclosure and execution of judgment are posted in the most conspicuous area
35 
of the municipal building, the municipal public market, the rural bank, the
36 
barangay hall, and the barangay public market, if any, where the land
37 
mortgaged is situated during the period of sixty (60) days immediately preceding
38 
the public auction or execution of judgment.
39 
Proof of publication as required herein shall be accomplished via an affidavit of
40 
the sheriff or officer conducting the foreclosure sale or execution of judgment
41 
and shall be attached with the records of the case:
42 
Provided, that when a homestead or free patent is foreclosed, the homesteader
43 
or free patent holder, as well as his heirs shall have the right to redeem the
44 
same within one (1) year from the date of foreclosure in the case of land not
45 
covered by a Torrens Title or one (1) year from the date of the registration of
46 
the foreclosure in the case of land covered by a Torrens Title, other laws
47 
notwithstanding.


1 
SEC. 14. Foreclosure of Real Estate Mortgage - A rural bank shall be
2 
allowed to foreclose lands mortgaged to it including lands covered by Republic
3 
Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of
4 
1988, as amended. Provided, that said lands shall be subject to the retention
5 
limits provided under Republic Act No. 6657.
6 
Rural banks which are not qualified to acquire or hold land in the Philippines shall
7 
be allowed to bid and take part in foreclosure sales of real property mortgaged
8 
to them, as well as to avail of enforcement and other proceedings, and
9 
accordingly to take possession of the mortgaged property, for a period not
10 
exceeding five (5)-years from actual possession. Provided, that in no event shall
11 
title to the property be transferred to such rural bank. In case the rural bank is
12 
the winning bidder, it shall, during the said five (5)-year period, transfer its rights
13 
to a qualified Philippine National, without prejudice to a borrower's rights under
14 
applicable laws. Should a rural bank be not able to transfer such property within
15 
the five (5)-year period, the rural bank shall be penalized one-half (1/2) of one
16 
percent (1%) per annum of the price at which the property was foreclosed until
17 
the rural bank is able to transfer the property to a qualified Philippine National.
18 
SEC. 15. Features of Preferred Shares - Stocks held by the LBP, the DBP or
19 
by any government-owned or -controlled bank or financial institution, under the
20 
terms of Section 6 hereof, shall be made preferred only as to assets upon
21 
liquidation and without the power to vote and shall share in dividends
22 
distribution as declared by the board but not to exceed the prevailing 90-day T-
23 
bill rates at the date of declaration. Dividend rates for preferred shares shall
24 
follow the same limits.
25 
Provided, however, that if such stock of the LBP, the DBP or any government-
26 
owned or -controlled bank or financial institution is sold to private shareholders,
27 
the same may be converted into common stock as provided for in Section 6
28 
hereof.
29 
Provided, further, that pending the amendment of the Articles of Incorporation of
30 
the rural bank, if necessary, for the purpose of reflecting the conversion into
31 
common stock of preferred stock sold to private stockholders, the transfer shall
32 
be recorded by the 
rural bank In the stock and transfer book and such
33 
shareholders shall thereafter enjoy all the rights and privileges of common
34 
stockholders.
35 
SEC. 16. Report on Sale of Preferred Stocks - The corporate secretary of
36 
the rural bank shall 
submit to the BSP and the Securities and Exchange
37 
Commission (SEC) a 
report on every transfer of preferred stock to private
38 
shareholders, and such report received by the SEC shall form part of the
39 
corporate records of the rural bank. When all the preferred shares of stock of
40 
rural bank held by the LBP, the DBP or by any government-owned or -controlled
41 
bank or financial institution have been sold to private shareholders, the Articles
42 
of Incorporation of the rural bank shall be amended in accordance with the
43 
provision of the Revised Corporation Code of the Philippines to reflect the
44 
conversion of the preferred shares.
45 
For this purpose, the application for the amendment of the Articles of
46 
Incorporation shall include a certificate issued by the president, the corporate
47 
secretary, and a majority of the board of directors that all preferred shares have


1 
been sold to private shareholders. This certification shall be attached to the
2 
original Articles of Incorporation on file with the SEC.
3 
The SEC shall not register the amended articles of incorporation unless
4 
accompanied by the certificate of authority required under Section 14 of Republic
5 
Act No. 8791, otherwise known as the General Banking Law of 2000.
6 
SEC. 17. Powers of Rural Banks - In addition to the operations especially
7 
authorized in this act, and subject to rules and regulations of the BSP, any rural
8 
bank may:
9 
(a) Accept saving and time deposit;
10 
(b) Open current or checking accounts;
11 
(c) Act as correspondent for other financial institutions;
12 
(d) Act as a collection agent;
13 
(e) Act as (i) official depository of municipal, city, provincial or GOCC funds in
14 
the municipality, city, and province where the rural bank is located in
15 
areas where there are no government banks, and (ii) depository bank of
16 
GOCCs and government agencies as to funds allocated for programs
17 
awarded to the rural bank in an amount equivalent to approved guarantee
18 
or credit line;
19 
(f) Act as conduit bank for the disbursement of government funds intended
20 
for lending to agriculture, micro, small and medium enterprises (MSMEs)
21 
and projects for local economic development;
22 
(g) Participate in government program allocations for agricultural lending,
23 
social housing, loans to rural micro enterprises and other initiatives
24 
towards inclusive growth;
25 
(h) Grant loans;
26 
(i) Rediscount paper with any banking institution. Said institutions shall
27 
specify the nature of paper deemed acceptable for rediscounting;
28 
(j) Offer other banking services such as, but not limited to, trust, foreign
29 
currency loans and deposits, foreign and domestic remittances, and letters
30 
of credit; and
31 
(k) Extend credit facilities to private and government employees.
32 
Nothing in this section shall be construed as 
precluding a rural bank from
33 
performing, with prior approval of the Monetary Board, other services allowed for
34 
thrift and commercial banks under an expanded banking authority.
35 
SEC. 18. Investment in Allied Undertakings - Subject to such guidelines as
36 
may be established by the Monetary Board, rural banks may invest in equities of
37 
allied undertakings as hereinafter enumerated: 
Provided, that: (a) the total
38 
investment to equities shall not exceed twenty-five percent (25%) of the net
39 
worth of the rural bank; (b) the equity investment in any single enterprise shall
40 
be limited to fifteen percent (15%) of the net worth of the rural bank; and (c)
41 
the equity investment of the rural bank in any single enterprise shall remain a
42 
minority holding in that enterprise; Provided, further, that equity investment shall
43 
not be permitted in non-related activities.
44 
Allied undertakings shall include.
45 
(a) Banks, financial institutions and non-bank financial intermediaries;
46 
(b) Warehousing and other post-harvest facilities;
47 
(c) Fertilizer and agricultural chemical and pesticides distribution;


1
2
3
4
5
(d) Farm equipment distribution;
(e) Trucking and transportation of agricultural products;
(0 Marketing of agricultural products;
(g) Leasing; and
(h) Other undertakings as may be determined by the Monetary Board.
6 
SEC. 19. Tax Exemptions - Notwithstanding any law to the contrary:
7 
(a) All rural banks created and organized under the provisions of this Act shall
8 
be exempt from the payment of all taxes, fees and charges of whatever
9 
nature and description, except the corporate income tax and local taxes,
10 
fees and charges, for a period of five (5) years from the date of
11 
commencement of operations;
12 
(b) Surviving or consolidated Rural Bank which is party to a merger or
13 
consolidation shall be exempt from the payment of all taxes, fees and
14 
charges of whatever nature and description, except the corporate income
15 
tax and local taxes, fees and charges, for a period of five (5) years from
16 
the date of commencement of operation. Provided, That, the surviving or
17 
consolidated Rural Bank establishes an office or branch in an unbanked
18 
city or municipality as determined by the BSP.
19 
SEC. 20. Exemption from Single Borrower's Limit - Deposits of rural banks
20 
with government- owned or -controlled financial institutions like the LBP, and the
21 
DBP, are exempted from the single borrower's limit imposed by the General
22 
Banking Law of 2000.
23 
In areas where there are no government banks, rural banks may deposit in
24 
private banks more than the amount prescribed by the single borrower's limit,
25 
subject to the rules and regulations of the BSP.
26 
SEC. 21. Exemption from Registration Fees - Any Register of Deeds shall
27 
accept from any rural bank and its borrowers and mortgagors for registration,
28 
free from all charges, fees and documentary stamp tax, collectible under existing
29 
laws, any instrument, whether voluntary or involuntary, relating to loans or
30 
transaction extended by a rural bank in an amount not exceeding one million
31 
pesos (P1,000,000.00).
32 
Provided, however, that charges, if any, shall be collectible on the amount in
33 
excess of one million pesos; and that in instruments related to assignments of
34 
several mortgages consolidated in a single deed, if any, shall be levied only on
35 
the amount in excess of one million pesos of the consideration in the assignment
36 
of each mortgage, or such amount as the Secretary of Finance, upon
37 
recommendation of the Monetary Board, may prescribe as may be necessary to
38 
promote and expand the rural economy.
39 
SEC. 22. Conduit of LBP and DBP - Rural banks organized and operated
40 
under the provisions of this Act may act as agents or conduits of the LBP and the
41 
DBP in places where these bante have no offices, subject to accreditation
42 
guidelines.
43 
SEC. 23. Prohibited acts - Without prejudice to any prosecution under any law
44 
which may have been violated, a fine of not more than one million pesos or a
45 
penalty of not less than prision correctional and not more than reclusion
46 
temporal, or both, at the discretion of the court, shaii be imposed upon:


1. Any officer, employee, or agent of a rural bank who shall:
2
3
4
5
6
7
8 
9
10
11
12
13
14
15
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
(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;
(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 or aid in overvaluing any security for the purpose of 
influencing in any way of the action of the bank on any loan; or
(e) appear and sign as guarantor, endorser, or surety for loans granted; 
or
(f) 
violate any of the provisions of this Act.
16 
2. Any applicant for a loan from, or borrower of, a rural bank who shali:
(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 
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 as a gift, fee, 
commission or other form of compensation in order to influence such 
bank personnel into approving a loan application; or
(0 dispose or encumber the property or the crops offered as security for 
the loan.
31 
SEC. 24. Unauthorized Advertisement of Business Representation - Any
32 
bank not organized under this Act, and any person, association, or corporation
33 
doing the business of banking, not authorized under this Act which shall use the
34 
words "rural bank" as part of the name or title of such bank or of such person,
35 
association, or corporation, shall be punished by a fine of not less than five
36 
thousand pesos (P5,000) for each day during which said words are so used.
37 
SEC. 25. Implementation - For the purpose of carrying out the objectives of
38 
this Act, the BSP is authorized to enlist the assistance of any branch,
39 
department, bureau, office, agency, or instrumentality of the government,
40 
including government-owned or -controlled corporations, which may include the
41 
use of its personnel, facilities and resources.
42 
SEC. 26. Implementing Rules and Regulations - The BSP shall promulgate
43 
the rules and regulations for the effective enforcement of the provisions of this
44 
Act.
45 
SEC. 27. Separability Clause - Should any provision of this Act or any part
46 
thereof be declared invalid, the other provisions, insofar as they are separable
47 
from the invalid ones, shall remain in full force and effect.
8


1
2
3
4
5
6
7
8
SEC. 28. Repealing Clause - Republic Act Nos. 7353 and 10574 are hereby 
repealed. All laws, executive orders, rules and regulations or parts thereof which 
are inconsistent with this Act are likewise hereby repealed or amended 
accordingly.
SEC. 29. Applicability of Other Laws - The provisions of Republic Act No. 
7653, as amended, and Republic Act No. 8791, insofar as they are appiicabie and 
not in conflict with any provision of this Act, shali apply to rural banks organized 
hereunder.
9
10
11
SEC. 30. Effectivity - This Act shali take effect fifteen (15) days after its 
complete publication in the Official Gazaette or in a newspaper of general 
circulation in the Phiiippines.
Approved.