The Reserve Bank of India (RBI) on Monday said it has constituted an eight-member expert panel to draw up a regulatory road map for urban co-operative banks (UCBs) and study the sector’s consolidation prospects.
Among the terms of reference of this committee will be to suggest effective measures for faster rehabilitation and resolution of UCBs. It has been tasked to look into regulatory measures that the central bank has taken with respect to UCBs and evaluate the impact it has had over a period of five years. It has also been asked to suggest measures to strengthen the sector after amendments to the Banking Regulation Act, 1949, which gives the central bank more teeth to supervise them. The expert committee has been asked to submit its report within three months.
The expert committee will also evaluate the need for differential regulations and look at the prospect of allowing greater flexibility in permissible activities for UCBs with a view to enhance their resilience.
It has to come up with a vision document for a vibrant and resilient UCB sector, keeping in mind the interests of depositors and systemic issues, over a year after the crisis at Punjab and Maharashtra Co-operative Bank remains unresolved.
The committee will be headed by former deputy governor of RBI N S Vishwanathan. Other members include former chairman National Bank for Agriculture and Rural Development Harsh Kumar Banwala, chartered accountant Mukund M Chitale, retired Indian Administrative Service officers N C Muniyappa and R N Joshi, IIM Bangalore Professor M S Sriram, president of National Federation of Urban Co-operative Banks and Credit Societies Jyotindra M Mehta, and RBI Chief General Manager-in-Charge Neeraj Nigam.
Vidyadhar Anaskar, chairman of Maharashtra Urban Co-operative Banks Federation, said the terms of reference of the panel make it clear that the aim is to shrink space for UCBs by pushing for consolidation. There is just one person on the panel who has direct experience of working and managing UCBs. The experience with committees formed earlier to address issues faced by UCBs and implementation is unsatisfactory, Anaskar said, adding the approach adopted by the RBI is hardly conducive for growth of the sector.
India’s UCBs were brought under the ambit of the Banking Regulation (Amendment) Act, 2020, from June 26, 2020.
The central bank had said on February 5 that there was now near-parity between UCBs and commercial banks in respect of regulatory powers, including those related to governance, audit, and resolution.
As of March 2020, 1,539 UCBs held Rs 5.01 trillion in customer deposits and Rs 3.05 trillion in advances.