The Reserve Bank of India (RBI), over the last few years, have been introducing norms for urban cooperative banks with the hope of making them more professional and to help them expand their operations.

These include provisions that could help them turn into small finance banks.

In June 2018, the RBI released draft guidelines on the constitution of boards of management (in addition to the existing board of directors) to bring in members with specialised knowledge and professional management skills.

In September, it introduced a scheme for voluntary transition of UCBs into SFBs to strengthen regulation and increase opportunities for growth.

But sources said there has been little response to the norms announced by RBI. Perhaps, the criteria of a minimum net worth of Rs 50 crore as well as maintaining the Capital to Risk (Weighted) Assets Ratio of nine per cent and above to apply for voluntary transition to SFB under the scheme would be difficult.

Punjab & Maharashtra Co-operative Bank is a Multi-State Scheduled Urban Co-operative Bank.

“UCBs are increasingly facing competition from new players like payments banks, small finance banks and NBFCs. In order to remain competitive, it is necessary for them to adopt robust information technology (IT) systems, inter alia, by leveraging on the Reserve Bank’s IT support. As regards governance, the separation of executive and supervisory roles is essential to improve the interests of depositors,” the RBI had noted in its report on Developments in Cooperative Banking in December last year.

According to the report, there are 1,551 urban co-operative banks (UCBs) at end-March 2018 with assets worth Rs 5.63 lakh crore. There has been a gradual decline in such lenders on the back of mergers and consolidation in the sector.

Related Topics
comment COMMENT NOW