Cooperative Banks Urged To Shape Up, Cut Sticky Assets

The Union minister of state for finance Balasaheb Vikhe Patil today cautioned urban co-operative banks (UCBs) that they can neither expect to be spoon-fed nor could they look to the government for help in case they become sick.

Patil felt that these banks were mature enough to chart out a prudent course of direction for themselves.

Referring to the clamour of the UCBs for restoration of the facility whereby they could place their funds with the district central co-operative banks and the state co-operative banks by way of fixed deposits, Patil said, this dependence to earn interest income was responsible for the UCBs weakening and also resulted in their not seriously exploring the possibility of increasing other income.

Addressing a seminar on co-operative banking here today, Patil pointed out that the UCBs garnered 93 per cent of their income by way of interest, indicating that they were not diversifying their product portfolio, while the expenditure stood at a high of 73 per cent.

The minister felt that co-operation as a subject, like banking, should come under the Concurrent List and not come under the State subject. Further all the states would do well to enact the model co-operative act so that more autonomy could be conferred on the co-operative sector.

Management failure should be separated from project failure and failure of an advance due to recessionary trends, Patil said explaining the two reasons for the co-operative banks becoming weak.

He debunked the UCBs for lack of professionalism in functioning (they had neither a gemplan for mobilising resources nor an investment policy) and added that political and bureaucratic interference was impeding their growth. In this regard, Patil said all the directors on banks boards, be they the government or RBI nominees, should ideally undergo training.

Patil said he would take up the issues which have been raised by the UCBs like they being allowed a minimum time frame for achieving a net NPA level of 10 per cent, relaxation in the RBI proposal reducing the time period for an asset to be qualified as an NPA, one time settlement for NPAs and being allowed to take exposure in the capital markets.