The Hindu Business Line : New norms for urban co-ops' extension counters

In a move that will bring cheer to the urban co-operative banks (UCBs) in the country, the Reserve Bank of India on Monday permitted UCBs , which are registered in states that have signed memorandum of understanding with the RBI, to convert their extension counters into full-fledged branches.

The RBI had announced this in the Mid-Term Review of Annual Policy Statement in 2006-07.

These extension counters should have completed three years of operation, said the RBI in its guidelines issued on Monday.

It also said that these branches may be shifted provided the proposal is for shifting or relocating them within the city or town limit; the bank can ensure banking services to the existing customers of the extension counter; and no new extension counter will be allowed in the institution in which the extension counter is housed currently.

In 2004-05, the RBI put on hold authoristion for opening of branches for UCBs and said it would issue fresh branch licences only after a comprehensive policy was put in place. This was expected to include an appropriate legal and regulatory framework for the sector and the formulation of a policy for improving the financial health of the sector.

This relaxation is likely to see financially sound UCBs going on a branch-opening spree. Many of the bigger UCBs are actively acquiring smaller and weaker banks as a means of expanding their network.

A Vision Document for UCBs was placed in the public domain in March 2005, and a Medium-Term Framework was evolved based on the feedback. The Vision Document and the framework MTF envisaged regulatory coordination between the state governments and the RBI by signing of a MoU in each state to address the problems of dual control.

Eight State Governments, viz, Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Uttaranchal, Rajasthan, Chhattisgarh and Goa, have since entered into an MoU with the RBI.