UCB consolidation gains momentum

RBI REPORT ON TREND AND PROGRESS OF BANKING IN INDIA 2007-08

During 2007-08, a total of 54 merger proposals in the Urban Co-operative Bank (UCB) space were given necessary clearance by the Central Registrar of Co-operative Societies/Registrar of Co-operative Societies concerned.

In addition to this, 269 UCBs were under various stages of liquidation.

“Although their businesses expanded at impressive rates with both operating profit and net profit increasing during the year, due to the complex structure of the sector, regulation and supervision of UCBs have been a major challenge,” said the latest Reserve Bank of India (RBI) report on the trends and progress in the Indian banking sector.

According to the report, so far 23 state governments and the Central government have signed memoranda of understanding (MoUs) with RBI to set up State-level Task Forces for Cooperative Urban Banks (TAFCUBs). These task forces would identify potentially viable and non-viable UCBs and chart out revival plans and non-disruptive exit routes for them. Around 98.6 per cent of the total number of UCBs and 99.2 per cent of the total deposits of the sector have been covered under these TAFCUBs.

The RBI report also covered the progress of financial inclusion through no-frills accounts. The report debunked the claims of 100 per cent financial inclusion made by various state-level bankers’ committees (SLBCs).

The RBI studied 26 districts across the country and found that the actual extent of financial inclusion in these districts were much less than the claims made by respective SLBCs.

“Further, many of the bank accounts that were opened as part of the financial inclusion drive were not operated mainly due to distance factor and households not having regular income,” said the RBI report.