REPUBLIC ACT No. 5939

AN ACT AMENDING SECTIONS THREE, FOUR, FIVE, SEVEN, ELEVEN, FOURTEEN, SIXTEEN AND SEVENTEEN OF REPUBLIC ACT NUMBERED SEVEN HUNDRED TWENTY, AS AMENDED, OTHERWISE KNOWN AS THE RURAL BANKS ACT.

Section 1. Section three of Republic Act Numbered Seven hundred twenty, as amended, otherwise known as the Rural Banks Act, is hereby amended to read as follows:

"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, or to cooperatives of such farmers or merchants, and to supervise the operation of such banks."

Section 2. Section four of the same Act, as amended, is hereby amended to read as follows:

"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 organize a Rural Bank and/or subscribe to the shares of stock of any Rural Bank. One hundred percent of the capital stock of any Rural Bank shall be owned and held directly or indirectly by the 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 Development Bank of the Philippines, 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 but not exceeding one million pesos: Provided, further, That such shares of stock subscribed by the Development Bank of the Philippines may be sold at any time at par to private individuals who are citizens of the Philippines: Provided, finally, That in the sale of shares of stock subscribed by the Development Bank of the Philippines, the registered stockholders shall have the right of pre-emption within five years from the date of offer 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 Bank shall be citizens of the Philippines."

Section 3. Section five of the same Act, as amended, is hereby amended to read as follows:

"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 and merchants whose cash requirements are small.

"Loans may be granted by rural banks on the security of lands without Torrens titles where the owner of private property can show five years or more of peaceful, continuous and uninterrupted possession in the concept of an owner; or of 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 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 Land Authority 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 Land Authority or corresponding governmental agency; or of homesteads 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 rules 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: Provided, further, That in the case of lands pending homestead or free patent titles, copies of notices for the presentation of the final proof shall also be furnished the creditor rural bank and, if the borrower applicants fail to present the final proof within thirty days from date of notice, the creditor rural bank may do so for them at their expense: Provided, furthermore, That the applicant for homestead or free patent has already made improvements on the land and the loan applied for is to be used for further development of the same or for other productive economic activities: Provided, finally, That the appraisal and verification of the status of a land is the full responsibility of the rural bank and any loan granted on any land which shall be found later to be within the forest zone shall be for the sole account of the rural bank to the exclusion of the Central Bank counterpart.

"The foreclosure of mortgages covering loans granted by rural banks shall be exempt from the publication in newspapers now required by law where the total amount of the loan, including interests due and unpaid, does not exceed three thousand pesos. It shall be sufficient publication in such cases if the notices of foreclosure are posted in at least three of the most conspicuous public places in the municipality and barrio where the land mortgaged is situated during the period of sixty days immediately preceding the public auction. Proof of publication as required herein shall be accomplished by affidavit of the sheriff or officer conducting the foreclosure sale and shall be attached with the records of the case: Provided, That when a homestead or free patent land is foreclosed, the homesteader or free patent holder, as well as their heirs shall have the right to redeem the same within two years from the date of foreclosure in case of a land not covered by a Torrens title or two years from the date of the registration of the foreclosure in the case of a land covered by a Torrens title: Provided, finally, That in case of borrowers who are mere tenants the produce corresponding to their share may be accepted as security."

Section 4. Section seven of the same Act, as amended is hereby amended to read as follows:

"Sec. 7. To provide supplemental capital to any Rural Bank until it has accumulated enough capital of its own or stimulate private investments in Rural Banks, the Development Bank of the Philippines, shall upon certification of the Monetary Board which shall be final, on the existence of such need, subscribe within thirty days to 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 subscription but not exceeding one million pesos. Provided, however, That shares of stock issued to the Development Bank of the Philippines, pursuant to the section, may at any time be paid off at par and retire in whole or 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 Development Bank of the Philippines 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 Development Bank of the Philippines, the registered private shareholders of the Rural Bank shall have the right of pre-emption within five years from date of offer in proportion to their respective holdings.

"Stock held by the Development Bank of the Philippines, 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 not exceeding two per cent thereof without preference: Provided, however, That if such stock of the Development Bank of the Philippines is sold to private shareholders, the same shall be converted into common stock of the class provided for in Section nine."

Section 5. Section eleven of the same Act as amended, is hereby amended by adding after subparagraph (e) thereof a new subparagraph to be denominated as subparagraph (f) which shall read as follows:

"(f) Act as official depository of municipal, city or provincial funds in the municipality, city or province where it is located, when so authorized by the Monetary Board in accordance with the provisions of Republic Act Numbered Two hundred and sixty-five and subject to such limitations as may be deemed necessary for the protection of said funds."

Section 6. Section fourteen of the same Act, as amended, is hereby amended to read as follows:

"Sec. 14. All rural banks created and organized under the provisions of this Act with net assets not exceeding one million pesos, excluding the counterpart capital subscribed and paid in by the Government under Sections seven and eight of this Act, shall be exempt from the payment of all taxes, charges and fees of whatever nature and description: Provided, however, That when the net assets of a rural bank exceed one million pesos, the taxes, charges and fees shall be levied in the proportion that such excess bears to the said net assets: Provided, finally, That when the net assets of a rural bank exceed three million pesos, it shall pay all taxes, fees and charges like any other bank."

Section 7. Section sixteen of the same Act, as amended, is hereby amended to read as follows:

"Sec. 16. Any justice of the peace, in his capacity as notary ex-officio, shall administer the oath to or acknowledge the instruments of, any Rural Bank and its borrowers or mortgagors, free from all charges, fees and documentary stamp tax, collectible under existing laws, relative to any loan or transaction not exceeding three thousand pesos."

Section 8. Section seventeen of the same Act, as amended, is hereby amended to read as follows:

"Sec. 17. Any register of deeds shall accept from any Rural Bank and its borrowers or 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 transactions extended by Rural Bank in an amount not exceeding three thousand pesos; Provided, however, That charges, if any, shall only be collectible on the amount in excess of three thousand pesos; and that in instruments related to assignments of several mortgages consolidated in a single deed, charges or fees, if any, shall be levied only on the amount in excess of three thousand pesos of the consideration in the assignment of each mortgage."

Section 9. This Act shall take effect upon its approval.

Approved: June 12, 1969


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