Our Bureau

Mumbai, March 4

THE Reserve Bank of India proposes to treat urban co-operative banks with deposit of over Rs 50 crore on a par with commercial banks for the purpose of regulation. However, this would be subject to the existing relaxations that are in force.

In a draft vision document on urban co-operative banks (UCBs) released for public comment, the central bank said UCBs having one branch with deposits of less than Rs 50 crore should be subjected to simpler regulatory and supervisory requirements.

Such banks in particular are proposed to be given an additional three years to classify non-performing assets based on 90 days' delinquency norm. They would be required to build adequate provisions during this period to transit to the 90-day norm at the end of three years.

The vision document also proposes to set up a State-level task force on UCBs comprising officials from the RBI, the State Governments and representatives from the sector in five States with high concentration of UCBs Maharashtra, Gujarat, Karnataka, Andhra Pradesh and Tamil Nadu.

The central bank would also explore other States where banks' licence applications are pending with the RBI, a press release issued by RBI said.

The vision document intends to put in place a mechanism that would address the problems of dual control, a consultative arrangement for identifying weak but potentially viable entities, the apex bank said. It would also identify unviable entities and provide timely exit route, it added.

The document suggested signing of a memorandum of understanding between the RBI and the State Governments to ensure that the difficulties caused by dual control are suitably addressed.

(This article was published in the Business Line print edition dated March 5, 2005)
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