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PRESIDENTIAL DECREE NO. 122
PRESIDENTIAL DECREE NO. 122 -
AMENDING CERTAIN Sections OF REPUBLIC ACT NUMBERED SEVEN HUNDRED
TWENTY, OTHERWISE KNOWN AS THE "RURAL BANKS' ACT"
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WHEREAS, there were pending before Congress
prior to the promulgation of Proclamation No. 1081, dated September 21,
1972, urgent banking measures proposing amendments to Republic Act No.
720, as amended, entitled "The Rural Banks' Act" which are essential to
the national development program of the Government; chanroblesvirtualawlibrary
WHEREAS, an extensive survey and study of the banking and credit system
had been undertaken for the purposes of assessing its adequacy in
Philippine economic growth, and of facilitating the savings-investment
process in development;chanroblesvirtualawlibrary
WHEREAS, the result of the survey was an integrated set of
recommendations which were accepted, with modifications by the monetary
authorities, and made the basis of this Decree to enable rural banks to
service the credit needs of small farmers and merchants in rural
communities more effectively;chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution as
Commander-in-Chief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972, and
General Order No. 1, dated September 22, 1972, as amended, and in order
to effect the desired changes and reforms in the social, economic, and
political structure of our society, do hereby order and decree the
amendment of Republic Act No. 720, as amended, as follows: chanroblesvirtualawlibrary
Section 1. Section four of Republic Act Numbered
Seven hundred twenty is hereby amended to read as follows:cralaw:red
"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 and corporations primarily organized to hold
equities in Rural Banks within a defined region, provided any such
corporation is at least partly owned by residents of that particular
region, may organize a Rural Bank and/or subscribe to the shares of
stock of any Rural Bank. With the prior approval of the Monetary Board,
the extent of the equity investment in any Rural Bank of corporations
contemplated under this section shall not be subject to any limitation,
the provisions of existing laws to the contrary, notwithstanding. One
hundred per cent of the capital stock of any Rural Bank shall be owned
and held directly or indirectly 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 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
one year 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; Provided, however, That no
full-time appointive or elective public official shall at the same time
serve as officer, director, legal counsel or consultant of any Rural
Bank except in cases where such service is incident to financial
assistance provided by the Government or a government-owned or
controlled corporation to the bank." chanroblesvirtualawlibrary
Section 2. Section five of the same Act is hereby
amended to read as follows:cralaw:red
"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 owing 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 fifty 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. chanroblesvirtualawlibrary
"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 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 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: 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 (30) 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. chanroblesvirtualawlibrary
"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 loan, including interests due and unpaid,
does not exceed three thousand pesos (P3,000.00). It shall be
sufficient publication in such cases if the notices of foreclosures 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 3. Section six of the same Act is hereby
amended to read as follows:cralaw:red
"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 fifty thousand
pesos and of essential rural enterprises or industries, other than
those which are strictly agricultural in nature." chanroblesvirtualawlibrary
Section 4. Section seven of the same act is hereby
amended to read as follows:cralaw:red
"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, of 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 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 this section, may, at
any time, be paid off at par and retired 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 one year from date of offer
in proportion of their respective holdings. chanroblesvirtualawlibrary
"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 ten of the same Act is hereby
amended to read as follows:cralaw:red
"Sec. 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 credit
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 Rural Banks; in conducting training courses for
personnel of Rural Banks; and, in general, in supervising the business
and corporate operations of the Rural Banks. chanroblesvirtualawlibrary
"The director of the Department of the Central bank designated by the
Monetary Board to supervise Rural Banks shall have the power to enforce
the laws, orders, instructions, rules and regulations promulgated by
the Monetary Board applicable to Rural Banks; to require Rural Banks,
their directors, officers and agents to conduct and manage the affairs
of the Rural Bank in a lawful and orderly manner; and, upon proof that
the Rural Bank or its board of directors or officers are conducting and
managing the affairs of the bank in a manner contrary to laws, orders,
instructions, rules and regulations promulgated by the Monetary Board
or in a manner substantially prejudicial to the interests of the
government, depositors or creditors, to take over the management of
such bank when specifically authorized to do so by the Monetary Board
after due hearing until a new board of directors and officers are
elected and qualified without prejudice to the prosecution of the
persons responsible for such violations under the provisions of
sections thirty-two, thirty-three and thirty-four of Republic Act
Numbered sixty-five, as amended, (The Central Bank Act). chanroblesvirtualawlibrary
"The management of the Rural Bank by the Central Bank shall be without
expense to the Rural Bank, except such as is actually necessary for its
operation, pending the election and qualification of a new board of
directors and officers to take the place of those responsible for the
violations or acts contrary to the interests of the government,
depositors or creditors."
"The director and the examiners of the Department of the Central Bank
charged with the supervision of Rural Banks are hereby authorized to
administer oaths to any director, officer or employee of any Rural Bank
or to any voluntary witness and to compel the presentation of all
books, documents, papers or records necessary in his or their judgment
to ascertain the facts relative to the true condition of any Rural Bank
or to any loan."
Section 6. A new section is hereby added after
Section eleven of the same Act to read as follows: chanroblesvirtualawlibrary
"Sec. 11-A. Rural Banks may invest in equities of
allied undertakings, except banks, as may be approved by the Monetary
Board: Provided, That (1) the total investment in equities shall not
exceed twenty-five per cent of the net worth of the Rural Bank; (2) the
equity investment in any single enterprise shall be limited to fifteen
per cent of the net worth of the Rural Bank, and (3) the equity
investment of the Rural Bank in any single enterprise shall remain a
minority holding in that enterprise except where the enterprise is not
a financial intermediary: Provided, further, That where such allied
undertaking is a wholly or majority-owned subsidiary of a Rural Bank,
the same may be subject to examination by the Central Bank: Provided,
finally, That equity investments shall not be permitted in non-related
activities."
Section 7. Section thirteen of the same Act is hereby
amended to read as follows: chanroblesvirtualawlibrary
"Sec. 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."
"In normal times, the Central Bank may rediscount against paper
evidencing a loan granted by a Rural Bank to any of its customers which
can be liquefied within a period of three hundred sixty days: Provided,
however, That for the purpose of implementing a nationwide program of
agricultural and industrial development, Rural Bank are hereby
authorized, under such terms and conditions as the Central Bank shall
prescribe, to borrow, on a medium or long-term basis, funds that the
Central Bank or any other government financing institution shall borrow
from the International Bank for the Reconstruction and Development or
other international or foreign lending institutions for the specific
purpose of financing the above-stated agricultural and industrial
program. Repayment of loans obtained by the Central Bank of the
Philippines or any other government financing institutions from said
foreign lending institutions under this section shall be guaranteed by
the Republic of the Philippines."
Section 8. Section sixteen of the same Act is hereby
amended to read as follows:cralaw:red
"Sec. 16. Any city or municipal judge in his capacity
as notary public, 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 five thousand pesos."
Section 9. Section seventeen of the same Act is
hereby amended to read as follows:cralaw:red
"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 a Rural Bank in an amount
not exceeding five thousand pesos: Provided, however, That charges, if
any, shall only be collectible on the amount in excess of five 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 five thousand pesos of the
consideration in the assignment of each mortgage." chanroblesvirtualawlibrary
Section 10. Section eighteen of the same Act is
hereby amended to read as follows:cralaw:red
"Sec. 18. Any Rural Bank organized under this Act
may, pursuant to regulations promulgated for the purpose by the
Monetary Board, be required to contribute to the Central Bank an annual
fee to help defray the cost of maintaining the appropriate supervising
department within the Central Bank in an amount to be determined by the
Monetary Board but in no case to exceed one twentieth of one per cent
(1/20 of 1%) of its average total assets during the preceding year, as
shown on its end-of-month balance sheets, after deducting its cash on
hand and amounts due from banks, including the Central Bank."
Section 11. Section twenty-seven of the same Act is
hereby amended to read as follows:cralaw:red
"Sec. 27. The provisions of Republic Act Numbered Two
hundred and sixty-five, as amended, and Three hundred thirty-seven, as
amended, insofar as they are applicable and not in conflict with any
provision of this Act, are hereby made a part of this Act."
Section 12. This Decree shall take effect immediately.
Done in the City of Manila,
this 29th day of January, in the year of Our Lord, nineteen hundred and
seventy-three.
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