RBI sets up expert group for granting new UCB licences

The Reserve Bank of India (RBI) today set up an expert group to study granting of licences to new Urban Co-operative Banks (UCBs), a move that comes a few months after the central bank invited comments on entry of new banks.

The committee under the chairmanship of financial sector expert Y H Malegam would review the regulatory policy on setting up of new UCBs and lay down entry point norms for new UCBs.

As per the terms of reference, the seven-member expert panel would examine whether licensing could be restricted only to financially sound and well managed cooperative credit societies through conversion route.

"It was announced in the Annual Policy Statement 2010-11 to set up a committee comprising all stakeholders for studying the advisability of granting new urban co-operative banking licences under Section 22 of the Banking Regulation Act, 1949," the RBI said in a statement.

It would also make recommendations relating to the legal and regulatory structure to facilitate the growth of sound UCBs especially in the matter of raising capital consistent with cooperative principles, it said.

Besides, it would examine other issues incidental to licensing of UCBs and make appropriate recommendations, it said.

The other members of the high level expert group include National Bank of Agriculture and Rural Development (Nabard) Chairman U C Sarangi, Principal Secretary Co-operation (Maharashtra) S K Goel, National Federation of Co-operative Urban Banks President H K Patil and Indira Gandhi National Open University Director K Elumalai.

Besides, professionals with expertise and experience in co-operative sector will also be drafted in the committee as special invitees, it said.

The panel would review the need for organization of new UCBs in the context of the existing legal framework for UCBs, the thrust on financial inclusion in the economic policy and proposed entry of new commercial banks into the banking space.

In August, RBI announced discussion paper on new banking licences and regulations for the same to foster greater competition.

"The Reserve Bank is considering providing licences to a limited number of new banks. A larger number of banks would foster greater competition, and thereby reduce costs and improve the quality of service," the central bank had said in the discussion paper.