Ucbs Want Rbi To Be The Regulator

Urban co-operative bankers have demanded that the Reserve Bank of India (RBI) be the sole regulator of their affairs so as to reinforce public confidence in their functioning.

This demand comes despite the fact that the central bank had, in its monetary and credit policy for 2001-02, proposed the setting up of a new apex supervisory body to the Centre to take over the entire inspection / supervisory functions in relation to the 2,000 odd scheduled and non-scheduled UCBs in the country.

According to D R Shirodkar, managing director, Saraswat Co-operative Bank, the malaise afflicting the sector was mainly due to the tremendous clout wielded by politicians over the co-operative banks. He felt that if a supervisory body is set-up then the sector would become more vulnerable to political pressure.

"Abolition of dual control is quite necessary. Except registration of co-operative societies, approval and amendment of bye-laws, election of the managing committee and protection of members' rights, the UCBs should be under the control of the RBI," Shirodkar said at a seminar on the problems faced by the co-operative banks on Saturday.

D Krishna, chief executive, NAFCUB, while pointing out that the UCBs were the only alternative to informal money lending, said these banks were part of the mainstream banking. Being regulated by the RBI reinforces public confidence in the banks else there is the fear of them being equated with non-banking finance companies, he added.

Referring to the Madhava Rao Committee recommendation calling for setting up of a rehabilitation fund for UCBs with an initial corpus of Rs 50 crore, Satish Marathe, CEO, Janakalyan Sahakari Bank, pointed out that the corpus was too small.

He suggested enhancement in the corpus to not only help some of the Gujarat-based UCBs tide over temporary shortfall in their Statutory Liquidity Ratio and cash reserve ratio commitments but also improve the lot of around 45 UCBs in Andhra Pradesh that have been classified as weak banks.

With capital markets being out of bounds for co-operative banks, Marathe opined that the central bank should forthwith come out with guidelines so that UCBs could raise funds via a Tier-II subordinated debt issue to enable them to improve their capital adequacy ratio (CAR) and increase business.