RBI resurrects ghost of UCB conversions

In the bimonthly meeting of the Monetary Policy Committee (MPC) held on Wednesday, Reserve Bank of India, among other things, has accepted the recommendations of the R Gandhi committee on voluntary conversion of urban cooperative banks.

The MPC meeting which increased the policy repo rate by 25 basis points to 6.25 per cent, felt that taking the R Gandhi Committee recommendations into consideration, it has been decided to allow voluntary transition of UCBs meeting the prescribed criteria into Small Finance Banks. The detailed scheme will be announced separately.

Titled “Voluntary Transition of Urban Cooperative Banks into Small Finance Banks”, RBI press release reads “The High Powered Committee on Urban Cooperative Banks (UCB), chaired by Shri R. Gandhi, the then Deputy Governor of Reserve Bank, had, inter alia, recommended the voluntary conversion of large Multi-State UCBs into Joint Stock Companies and other UCBs which meet certain criteria into Small Finance Banks (SFBs).

It bears recall that the cooperative sector was on edge a couple of years ago when RBI mooted the idea of conversion of urban cooperative banks into Joint Stock Companies. It fought back and convinced the Union Agriculture Minister Radha Mohan Singh of its pernicious implications.

It was in Patna that answering to NCUI President’s concern over the issue Singh informed that his Ministry has rejected the Gandhi panel recommendations on conversion of urban cooperative banks. “I rejected the file as soon as it landed at my desk. Such efforts to weaken cooperative could never succeed till I and Narendra Modiji are there”, he had said emphatically.

Cooperators cutting across party lines have argued that cooperative and especially the Urban Coop Banks should be allowed to grow to their full potential and restrictions not be imposed on their aspirations.

The limiting factor for UCBs has been that they cannot participate in the 12 core business activities owing to the tag ‘cooperative’ such as road constructions, offering bank guarantees and other things.

Instead of addressing the genuine concern of the sector, RBI seems hell bent on destroying cooperatives, a large number of cooperators told Indian Cooperative. They also wonder what happened to the promise made by Radha Mohan Singh in Patna on the issue.


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Comment ( 1 )

  1. Karik

    Kudos! What a neat way of thnkiing about it.

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