Money & Banking

Banking Regulation Act must be amended to provide full power to RBI to regulate UCBs: Sahakar Bharati

Mumbai | Updated on October 17, 2019 Published on October 17, 2019

The Banking Regulation Act needs to be amended to provide full regulatory powers to the Reserve Bank of India (RBI) to regulate all urban co-operative banks (UCBs), irrespective of whether they are registered under the State Co-operative Societies Act or the Multi-State Co-operative Societies Act, according to Satish Marathe, Founder-Member, Sahakar Bharati, and Director, Central Board, RBI.

In order to tackle the issue of dual-regulation of UCBs, amending only Multi-State Co-operative Societies Act will not be enough.

This suggestion by Sahakar Bharati to Union Finance Minister Nirmala Sitharaman comes in the backdrop of the RBI recently finding major financial irregularities, failure of internal control and systems at Punjab and Maharashtra Co-operative Bank (PMC Bank), and wrong/under-reporting of its exposures under various off-site surveillance reports to the RBI.

PMC Bank reportedly has a single large exposure of about ₹6,500 crore, accounting for 73 per cent of its total loan book, to the bankrupt HDIL Group. The Mumbai-based bank has been placed under directions, whereby depositors cannot withdraw a sum exceeding ₹40,000 of their total balance, and the bank has been prevented from granting or renewing loans and advances, making investments, and incurring liabilities, including borrowal of funds and acceptance of fresh deposits.

“Due to the fraud perpetrated on innocent and unsuspecting depositors, both individuals and institutions have been taken for a ride and, as a consequence of the fraud, co-operative sector institutions in particular have suffered a big jolt.

“Deposits of over 100 UCBs, over 15,000 housing societies, and a few thousand credit co-operative societies are facing an unprecedented challenge, which may result in the failure of some of them due to the cascading effect,” said Marathe.

Sahakar Bharati, which an all-India organisation for promoting the co-operative movement in the country, emphasised that a vision document and a roadmap for the co-operative banking sector is the urgent need of the hour.

A broad-based committee of officials from the RBI, Union Finance Ministry, Union Agriculture and Co-operation Ministry, and at least two eminent co-operators, should be constituted for the purpose.

Sahakar Bharati has sought the intervention and guidance of the Finance Minister to formulate an out-of-box solution to redress the hardships being faced by depositors and the co-operative sector.

Published on October 17, 2019
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