AMENDING FURTHER REPUBLIC ACT NUMBERED SEVEN HUNDRED TWENTY, OTHERWISE KNOWN AS THE RURAL BANKS' ACT

• Number: Presidential Decree No. 1403
• Sections: 6

Preamble

WHEREAS, the expansion of the rural economy must be promoted

by providing the means of facilitating and improving the productive capacities

of the people of the rural communities; and

WHEREAS, the law should adapt to changing conditions in

order to attain its objectives and to better serve the credit requirements of

small farmers, small merchants, small business enterprises, essential rural

enterprises or industries and cooperatives.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers vested in me by the Constitution, do hereby

order and decree the amendment of Republic Act No. 720, as amended, as

follows:

Section 1

SECTION 1. Section 5 of Republic Act No. 720, 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 one hundred thousand pesos or such amount as

the monetary board may prescribe as may be warranted by prevailing economic

conditions. 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 concept of 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) Department of Agrarian Reform 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 Department of Agrarian Reform 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-applicant 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.

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 Ten thousand

pesos (P10,000.00) or such amount as the Monetary Board may prescribe as may be

warranted by prevailing economic conditions. 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 his heirs shall have the right to redeem the same within two years from

the date of foreclosure in the case of land not covered by a Torrens Title or

two years from the date of the registration of the foreclosure in the case of

land covered by a Torrens Title: Provided, finally, That in the case of

borrowers who are mere tenants, the produce corresponding to their share may be

accepted as security.

Section 2

SEC. 2. Section 6 of the same Act, as amended, is hereby

amended to read as follows:

"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 One hundred thousand pesos, or such amount as the Monetary Board may

prescribe as may be warranted by prevailing economic conditions, and of

essential enterprises or industries, other than those which are strictly

agricultural in nature."

Section 3

SEC. 3. Section 16 of the same Act, as amended, is hereby

amended to read as follows:

"SEC. l6. 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 Ten thousand pesos, or such

amount as the Secretary of Finance, upon the recommendation of the Monetary

Board, may prescribe as may be necessary to promote and expand the rural

economy."

Section 4

SEC. 4. Section 17 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

a Rural Bank in an amount not exceeding Ten thousand pesos: Provided,

however, That charges, if any, shall only be collectible on the amount in

excess of Ten 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 Ten thousand pesos of the

consideration in the assignment of each mortgage, or such amount as the

Secretary Board, may prescribe as may be necessary to promote and expand the

rural economy."

Section 5

SEC. 5. This Decree shall take effect immediately.

Done in the City of Manila, this 6th day of June, in the year of Our Lord,

nineteen hundred and seventy-eight.

(Sgd.) FERDINAND E. MARCOS

President of the

Philippines

By the President:

(Sgd.) JACOBO C. CLAVE

Presidential Executive

Assistant