Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
NINETEENTH CONGRESS 
First Regular Session 
HOUSE BILL NO. ____ 
Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR., 
HON. MIGUEL LUIS R. VILLAFUERTE, HON. TSUYOSHI ANTHONY G. HORIBATA 
AND HON. NICOLAS ENCISO VIII 
EXPLANATORY NOTE 
Republic Act No. 7353, Section 8, aims to provide ailing rural banks and supplemental 
capital until they have accumulated enough capital of their own or have simulated enough 
private investments. This section mandates that the Land Bank of the Philippines, the 
Development Bank of the Philippines or any government-owned or controlled bank or 
financial institution, shall subscribe to the capital stock of any rural bank from time to time. 
The second paragraph of Section 8 further provides the graduated dividend rates to be 
paid to the Land Bank of the Philippines, the Development Bank of the Philippines or any 
government-owned or controlled bank or financial institution for their respective equity 
investments. These prescribed rates, however, have proven to be too onerous for the 
banks. There is a need for a more reasonable dividend rate to provide for and to help 
rehabilitate ailing rural banks. 
The immediate approval of this bill is earnestly sought. 
LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR. 
 MIGUEL LUIS R. VILLAFUERTE  
TSUYOSHI ANTHONY G. HORIBATA 
NICOLAS ENCISO VIII 
July 14, 2022
5:03 pm
2016


Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
NINETEENTH CONGRESS 
First Regular Session 
HOUSE BILL NO. ____ 
Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR., 
HON. MIGUEL LUIS R. VILLAFUERTE, HON. TSUYOSHI ANTHONY G. HORIBATA 
AND HON. NICOLAS ENCISO VIII 
AN ACT  
PROVIDING FOR A NEW RURAL BANKS ACT,   
REPEALING 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 Philippines in Congress 
assembled: 
SECTION 1.  Short Title. – This Act shall be known as the "New Rural Banks Act.” 
SECTION 2. Declaration of Policy. – The State hereby recognizes the need to promote 
comprehensive local community development across the country with the end in view of 
attaining equitable distribution of opportunities, income and wealth, a sustained increase 
in the amount of goods and services produced by local communities and in expanding 
productivity as a key objective to improve the quality of life for all, especially the 
underprivileged. 
Towards these ends, the State shall establish a rural banking system and assist in 
ensuring the viability of rural banks which are strategic agents for the attainment of 
financial inclusivity, and in recognition of their long-standing contribution in the pursuit of 
making financial services accessible to all individuals and business entities.   
2016


SECTION 3. Regulatory and Supervisory Powers of the Monetary Board. – In 
furtherance of this policy, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) 
shall formulate the necessary rules and regulations governing the establishment, 
supervision, and operation of rural banks to ensure that rural banks operate in a safe and 
sound manner in the performance of their mandate.  
 
SECTION 4. Organization. – Rural banks shall be organized in the form of stock 
corporations, and no rural bank shall be operated without a certificate of authority from 
the BSP.  
Duly established cooperatives and corporations primarily organized to hold 
equities in rural banks may organize a rural bank or subscribe to the shares of stock of 
any rural bank:  
Provided, that a cooperative or corporation owning or controlling the whole or 
majority of the voting stock of the rural bank shall be subject to special examination and 
to such rules and regulations as the Monetary Board may prescribe.  
 
SECTION 5. Ownership. – No less than forty percent (40%) of the voting stocks of a 
rural bank shall be owned by citizens of the Philippines or corporations or associations 
organized under the laws of the Philippines at least sixty percent (60%) of whose capital 
is owned by such citizens. Non-Filipino citizens may own, acquire or purchase up to sixty 
percent (60%) of the voting stocks in a rural bank. The percentage of foreign-owned voting 
stocks shall be determined by the citizenship of the individual stockholders in that rural 
bank. The citizenship of the corporation which is a stockholder in a rural bank shall follow 
the citizenship of the controlling stockholders of the corporation, irrespective of the place 
of incorporation.  
 
SECTION 6. Subscription by Government-Owned or -Controlled Bank or 
Financial Institution. – The following rules on subscription shall apply: 
(a) If subscription of a private shareholders to the capital stock of a rural bank cannot be 
secured or is not available, or insufficient to meet the normal credit needs of 
the locality, the Land Bank of the Philippines (LBP), the Development Bank of the 


Philippines (DBP), or any government-owned or controlled bank or financial 
institution, on representation of the said private shareholders but subject to the 
investment guidelines, policies and procedures of the bank or financial institution 
and upon approval of the Monetary Board of the BSP, 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 and unimpaired capital of the private 
stockholders or such amount as the Monetary Board may prescribe as may be 
necessary to promote and expand rural economic development. 
 
(b) To provide supplemental capital to any rural bank until it has accumulated enough 
capital of its own or stimulate private investments in rural banks, and subject to 
the investment guidelines, policies and procedures of the bank or financial 
institution, the LBP, the DBP or any government-owned or -controlled bank or 
financial institution  may subscribe to the capital stock of any rural bank from time 
to time in an amount equal to the total equity investment of the private shareholders 
which shall be paid in full at the time of the subscription or such amount as may be 
necessary to promote and expand rural economic development.  
 
Provided, however, That shares of stock issued to the LBP, the DBP or any 
government owned or controlled bank or financial institution may, pursuant to this Section, 
at any time, be paid off at par value and retired in whole or in part if 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 investment of the LBP, the DBP or 
any government- owned or - controlled bank or financial institution: Provided, further, That 
such shares of stock  subscribed by the LBP, the DBP or any government-owned or 
controlled bank or financial  institution may be sold at adjusted book value to qualified 
individuals and juridical entities, subject to the provisions of Section 25-A of Republic Act 
No. 7653, or the “New Central  5 Bank Act”, as amended: Provided, finally, That in the 
sale of shares of stock subscribed by the LBP, the DBP or any government-owned or 
controlled bank or financial institution, preference shall be given to residents and juridical 
entities of the locality or province where the rural bank is located.  


 
In case of retirement of stock, replacement of equity investments of the LBP, the 
DBP or of any government-owned or -controlled bank or financial institution, the 
registered private shareholders of the rural bank shall have the right of preemption within 
one (1) year from the date of offer in proportion to their respective holdings.   
 
SECTION 7.  Board of Directors. – Non-Filipino citizens may become members of the 
board of directors of a rural bank but their participation in the board shall be limited to 
their proportionate share in the equity of the rural bank: Provided, however, that at least 
one (1) independent director shall be elected to the board of directors, unless otherwise 
prescribed by the Monetary Board of the BSP.   
 
SECTION 8. Directors and Officers. – No director or officer of any rural bank shall, either 
directly or indirectly, on their behalf or as the representative or agent of another, borrow 
any of the deposits or funds of such banks, nor shall they become a guarantor, endorser, 
or surety for loans from such bank to others, or in any manner be an obligor for money 
borrowed from the bank or loaned by it, except when it is with the written approval of the 
majority of the directors of the bank, excluding the director concerned. Any such approval 
shall be entered upon the records of the corporation and a copy of such entry shall be 
transmitted forthwith to the appropriate supervising department of the BSP.   
After due notice to the board of directors of the bank, the office of any bank director 
or officer who violates the provisions of this section may be declared vacant and the 
director or officer shall be subject to the penal provisions under Section 23 of this Act.  
 
SECTION 9.  Restrictions on Bank Exposures to Directors, Officers and their 
Related Interests. – The Monetary Board may regulate the amount of loans, credit 
accommodations and guarantees that may be extended, directly or indirectly, by the rural 
bank to its directors, officers, stockholders and their related interests. 
However, the outstanding loans, credit accommodations and guarantees which a 
rural bank may extend to each of its stockholders, directors, or officers and their related 


interests shall be limited to an amount equivalent to the respective unimpaired 
outstanding deposits and book value of the paid-in capital contributions in the bank.   
 
SECTION 10. Loans and Credit Accommodations Against Real Estate. – Loans or 
advances extended by rural banks shall be primarily for the purpose of meeting the credit 
needs of farmers, fishermen and farm families. For this purpose, rural banks may accept 
the following as collateral:  
 (1) Lands without Torrens Title where the owner of private property can show five (5) 
years 50 or more of peaceful, continuous and uninterrupted possession in concept 
of owner; or  
 
 (2) Portions of friar land estates or other lands administered by the Bureau of Lands that 
are covered by sales contracts and the purchasers have paid at least five (5) years 
installment thereon, without the necessity of prior approval and consent by the 
director of lands, or of portions of other estates under the administration of the 
Department of Agrarian Reform (DAR) or other governmental agency which are 
likewise covered by sales contracts and the purchasers have paid at least five (5) 
years installment thereon, without the necessity of prior approval and consent of the 
DAR or corresponding governmental agency; or  
 
(3) Homestead tax declarations or free patent lands pending the issuance of titles but 
already approved, the provisions of any law or regulations to the contrary 
notwithstanding: Provided, that when the corresponding titles are issued, the same 
shall be delivered to the Register of Deeds of the province where such lands are 
situated for the annotation of the encumbrance.  
 
SECTION 11. Loans and Credit Accommodation on the Security of Unissued 
Homestead or Free Patent. – In the case of lands pending issuance of homestead tax 
declarations or free patent titles, copies of the notices for the presentation of the final 
proof shall be furnished the creditor rural bank and, if the borrower applicants fail to 


present the final proof within thirty (30) days from date of notice, the creditor rural bank 
may do so for them at their expense:  
Provided, however, That proof of improvements made on the land is shown by the 
loan applicant who proffers an unissued homestead or free patent as security and the 
loan applied for is to be used for further development of the same or for other productive 
economic activities: Provided, further, That the responsibility for the appraisal and 
verification of the status of a land shall be incumbent upon the rural bank; and any loan 
granted on any land which shall be found later to be within a forestland shall be for the 
sole account of the rural bank.   
 
SECTION 12. Loans and other Credit Accommodations on Security of Farm 
Produce. – Borrowers, especially those who are mere tenants, can secure their loans 
with the produce corresponding to their share. 
 
SECTION 13. Foreclosure of Mortgages. – The foreclosure of mortgages covering 
loans granted by rural banks and executions of judgment thereon involving real properties 
levied upon by sheriff shall be exempt from the publications in newspapers as required 
by law where the total amount of loan, excluding interests due and unpaid, does not 
exceed One million pesos (P1,000,000.00) or such amount as the Monetary Board may 
prescribe by taking into account prevailing economic conditions.  
It shall be deemed sufficient publication in such cases where the notices of 
foreclosure and execution of judgment are posted in the most conspicuous area of the 
municipal building, the municipal public market, the rural bank, the barangay hall, and the 
barangay public market, if any, where the land mortgaged is situated, for a period of sixty 
(60) days immediately preceding the public auction or execution of judgment. 
Proof of publication as required herein shall be accomplished via an affidavit of the 
sheriff or officer conducting the foreclosure sale or execution of judgment and shall be 
attached with the records of the case: Provided, That when a homestead or free patent 
is foreclosed, the homesteader or free patent holder, as well as the heirs shall have the 
right to redeem the same within one (1) year from the date of foreclosure in the case of 


land not covered by a Torrens Title or one (1) year from the date of the registration of the 
foreclosure in the case of land covered by a Torrens Title, other laws notwithstanding.   
 
SECTION 14. Foreclosure of Real Estate Mortgage. – A rural bank shall be allowed to 
foreclose lands mortgaged to it including lands covered by Republic Act No. 6657, 
otherwise known as the Comprehensive Agrarian Reform Law of 1988, as amended: 
Provided, that said lands shall be subject to the retention limits provided under Republic 
Act No. 6657.   
Rural banks which are not qualified to acquire or hold land in the Philippines shall 
be allowed to bid and take part in foreclosure sales of real property mortgaged to them, 
as well as to avail of enforcement and other proceedings, and accordingly to take 
possession of the mortgaged property, for a period not exceeding five (5)-years from 
actual possession. Provided, that in no event shall title to the property be transferred to 
such rural bank. In case the rural bank is the winning bidder, it shall, during the said five 
(5)-year period, transfer its rights to a qualified Philippine national, without prejudice to a 
borrower’s rights under applicable laws. Should a rural bank be not able to transfer such 
property within the five (5)-year period, the rural bank shall be penalized one-half (1/2) of 
one percent (1%) per annum of the price at which the property was foreclosed until the 
rural bank is able to transfer the property to a qualified Philippine National.  
 
SECTION 15. Features of Preferred Shares of Stock Held by LBP, DBP or any 
Government-Owned or -Controlled Bank or Financial Institution. – Shares of stock 
held by the LBP, the DBP or by any government-owned or -controlled bank or financial 
institution, under the terms of Section 6 hereof, shall be considered preferred shares of 
stock only as to assets upon liquidation and without the power to vote and shall share in 
dividends distribution as declared by the board but not to exceed the prevailing 90-day T-
bill rates at the date of declaration. Dividend rates for preferred shares of stock shall follow 
the same limits: Provided, however,  That if such shares of stock of the LBP, the DBP or 
any government-owned or -controlled  bank or financial institution is sold to private 
shareholders, the same may be converted into common shares of stock as provided for 
in Section 6 hereof: Provided, further, That pending the amendment of the Articles of 


Incorporation of the rural bank, if necessary, for the purpose of reflecting the conversion 
into common shares of stock of preferred shares of stock sold to private stockholders, the 
transfer shall be recorded by the rural bank in the stock and transfer book and such 
shareholders shall thereafter enjoy all the rights and privileges of common stockholders. 
 
SECTION 16. Report on Sale of Preferred Shares of Stock. – The corporate secretary 
of the rural bank shall submit to the BSP and the Securities and Exchange Commission 
(SEC) a report on every transfer of preferred shares of stock to private shareholders, and 
such report received by the SEC shall form part of the corporate records of the rural bank. 
When all the preferred shares of stock of a rural bank held by the LBP, the DBP or by any 
government-owned or - controlled bank or financial institution have been sold to private 
shareholders, the Articles of Incorporation of the rural bank shall be amended in 
accordance with the provision of the Revised Corporation Code of the Philippines to 
reflect the conversion of the preferred shares of stock.   
For this purpose, the application for the amendment of the Articles of Incorporation 
shall include a certificate issued by the president, the corporate secretary, and a majority 
of the board of directors that all preferred shares of stock have been sold to private 
shareholders.  
This certification shall be attached to the original Articles of Incorporation on file with 
the SEC.  
The SEC shall not register the amended articles of incorporation unless 
accompanied by the certificate of authority required under Section 14 of Republic Act No. 
8791, otherwise known as the General Banking Law of 2000.  
 
SECTION 17. Powers of Rural Banks. – In addition to the operations especially 
authorized in this Act, and subject to rules and regulations of the BSP, any rural bank 
may: 
 (a) Accept savings and time deposits;  
 (b) Open current or checking accounts;  
 (c) Act as correspondent for other financial institutions;  
 (d) Act as a collection agent;  


 (e) Act as (i) official depository of municipal, city, provincial or GOCC funds in 
the   municipality, city, and province where the rural bank is located in areas 
where there are no government banks, and (ii) depository bank of GOCCs and 
government agencies as to funds allocated for programs awarded to the rural 
bank in an amount equivalent to approved guarantee or credit line;  
(f) Act as conduit bank for the disbursement of government funds intended for 
lending to agriculture, micro, small and medium enterprises (MSMEs) and 
projects for local economic development;  
(g) Participate in government program allocations for agricultural lending, social 
housing, loans to rural micro enterprises and other initiatives towards inclusive 
growth;  
(h) Grant loans;  
(i) Rediscount paper with any banking institution. Said institutions shall specify the 
nature of paper deemed acceptable for rediscounting;  
(j) Offer other banking services such as trust, foreign currency loans and deposits, 
foreign and domestic remittances, and letters of credit; and  
(k) Extend credit facilities to private and government employees.  
 
Nothing in this section shall be construed as precluding a rural bank from 
performing, with prior approval of the Monetary Board, other services allowed for thrift 
and commercial banks under an expanded banking authority.  
 
SECTION 18. Investment in Allied Undertakings. – Subject to such guidelines as may 
be established by the Monetary Board, rural banks may invest in equities of allied 
undertakings as hereinafter enumerated: Provided, that: (a) the total investment to 
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 undertakings shall 
include.  


(a) Banks, financial institutions and non-bank financial intermediaries; 
(b) Warehousing and other post-harvest facilities;  
(c) Fertilizer and agricultural chemical and pesticides distribution;  
(d) Farm equipment distribution; 
(e) Trucking and transportation of agricultural products;   
(f) Marketing of agricultural products;  
(g) Leasing; and  
(h) Other undertakings as may be determined by the Monetary Board.  
 
SECTION 19. Tax Exemptions. – Notwithstanding any law to the contrary:  
(a) 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;  
(b) A surviving or consolidated rural bank which is party to a merger or consolidation 
shall be exempt from the payment of all taxes, fees and charges of whatever 
nature and descriptions, except the corporate income tax and local taxes, fees 
and charges, for a period of five (5) years from the date of commencement of 
operation. Provided, That, the surviving or consolidated rural bank establishes 
an office or branch in an unbanked city or municipality as determined by the 
BSP.  
 
SECTION 20. Exemption from Single Borrower’s Limit. – Deposits of rural banks 
with government-owned or -controlled financial institutions like the LBP, and the DBP, 
are exempted from the single borrower's limit imposed by the General Banking Law of 
2000.   
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 the rules 
and regulations of the BSP.   
 


SECTION 21. Exemption from Registration Fees. – Any Register of Deeds shall accept 
from any rural bank, its borrowers and mortgagors for registration, free from all charges, 
fees and  documentary stamp tax, collectible under existing laws, any instrument, 
whether voluntary or involuntary, relating to loans or transaction extended by a rural bank 
in an amount not exceeding one million pesos (P1,000,000.00): Provided, however, That 
charges, if any, shall be collectible on the amount in excess of One million pesos; and 
that in instruments related to  assignments of several mortgages consolidated in a single 
deed, if any, shall be levied only on the amount in excess of One million pesos of the 
consideration in the assignment of each mortgage, or such amount as the Secretary of 
Finance, upon recommendation of the Monetary Board, may prescribe as may be 
necessary to promote and expand the rural economy.   
 
SECTION 22. Conduit of LBP and DBP. – Rural banks organized and operated under 
the provisions of this Act may act as agents or conduits of the LBP and the DBP in places 
where these banks have no offices, subject to accreditation guidelines.  
 
SECTION 23. Prohibited Acts. – Without prejudice to any prosecution under any law 
which may have been violated, a fine of not more than One million pesos (P1,000,000.00) 
or a penalty of not less than prision correctional and not more than reclusion temporal, 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;  
(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.  
 
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 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 
20 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  
(f) dispose or encumber the property or the crops offered as security for the loan.  
 
SECTION 24. Unauthorized Advertisement of Business Representation. – 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 Five thousand pesos (P5,000.00) for each 
day during which said words are so used.  
 
SECTION 25. Assistance of Other Government Agencies in Implementation. – For 
the purpose of carrying out the objectives of this Act, the BSP is authorized to enlist the 
assistance of any branch, department, bureau, office, agency, or instrumentality of the 
government, including government-owned or -controlled corporations, which may include 
the use of its personnel, facilities and resources.  
 


SECTION 26. Implementing Rules and Regulations. – The BSP shall promulgate the 
rules and regulations for the effective enforcement of the provisions of this Act. 
 
SECTION 27. Separability Clause. – Should any provision of this Act or any part thereof 
be declared invalid, the other provisions, insofar as they are separable from the invalid 
ones, shall remain in full force and effect.   
 
SECTION 28. Applicability of Other Laws. – The provisions of Republic Act No. 7653, 
as amended, and Republic Act No. 8791, insofar as they are applicable and not in conflict 
with any provision of this Act, shall apply to rural banks organized hereunder.   
 
SECTION 29. 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.  
 
SECTION 30. Effectivity. – This Act shall take effect fifteen (15) days after its complete 
publication in the Official Gazette or in a newspaper of general circulation.   
 
Approved.