The promise made by the Union Finance Minister in the Budget speech last week, has been fulfilled by the Union Cabinet on Wednesday when it decided to bring cooperative banks under the regulatory mechanism of Reserve Bank of India.
Hailing the decision RBI Board member and one of the founding members of Sahakar Bharati Satish Marathe said the efforts put in by Sahakar Bharati for the last 2-3 years have worked. “It was not Satish Marathe individually but the Sahakar Bharati which actually lobbied hard with the govt to bring in this amendment”, Marathe who was at the India International Centre (IIC) in Delhi and who was all smiles, said to this correspondent.
Listing several Circulars brought out by RBI from time to time including the one which allows co-op banks into Small Finance Bank, Marathe said this amendment alone would suffice now. “The amendment would put a stop to all the efforts RBI made in the past to keep an eye on co-op banks and UCBs”, said Marathe. The management of banks would be happy and so would be the customers, he underlined.
It bears recall that on Wednesday, briefing media persons after the Cabinet meeting, Information and Broadcasting Minister Prakash Javadekar said Cooperative Banks need to fulfil regulatory requirements set for scheduled commercial banks. The move will ensure greater accountability and transparency in the functioning of Cooperative Banks, he stated.
The amendment would not do away with the role of Central Registrar, however. He would be responsible for their registration, etc. Javadekar also gave the figure of UCBs active in the country and said that are 1,540 cooperative banks with 8.6 crore depositors’ money, with around Rs 5 lakh crore deposits in the country and the proposed amendment will protect the depositors.
Though there would not be any issues with the general recruitment process of co-op banks due to this amendment, the top management (CEO) would be selected by a Panel approved by the RBI. RBI also will have the right to recall a CEO.
Most importantly, the RBI would decide on the Panel of auditors for a UCB. Such panels would obviously be different for different categories of banks, depending on the size and business. “A panel of auditors suitable for a large UCB such as Saraswat Bank would not be useful for the smaller UCBs”, clarified Marathe.
Reactions from other UCB leaders have also been appreciative of the govt move. It bears recall that Saraswat Bank Chairman Gautam Thakur had already demanded full RBI regulations for the UCB sector in an interview earlier.
“This will lead to a better management and the standard of governance would certainly improve, Thakur had said in the interview.
Reacting to the development, Nafcub President Jyotindra Mehta was appreciative of the fact that the idea of the risk based premium has not been accepted by the government. Mehta said “ Please note that risk based premium has not been accepted by the government. Great relief for UCBs. NAFCUB has achieved another success. Since the last two years we had been representing our demand to the government not to levy premium on differential bases. It’s accepted.”, he said jubilantly.