Thursday proved a day of jubilations for urban cooperative banks’ fraternity when, during presentation of Sixth Bi-Monthly Monetary Policy Statement, RBI also talked of setting up Umbrella Organization for urban cooperative banks sooner than later.
“An exercise which started in 2006 has a sort of culmination today”, said a relieved Nafcub President Jyotindra Mehta who was part of the committee constituted by RBI in 2009 under V N Das to study and propose the idea in concrete form. “We studied several cases of Europe and America and felt the need to have an umbrella for the UCB sector”, recalled Mehta.
“It is true that for the first time perhaps, RBI has mentioned any Federation in its policy statement”, said D Krishna, former CE and a man who was part of all the committees made for the purpose. Krishna was upbeat on RBI’s admission of having received NAFCUB draft on the issue.
In its release RBI said “The Reserve Bank has received a proposal for setting up an UO from the National Federation of Urban Cooperative Banks and Credit Societies Ltd. (NAFCUB). A decision on the specifics of the UO proposal will be taken by the Reserve Bank shortly.”
Titled under “Statement on Developmental and Regulatory Policies” RBI release said “The structure, size, lack of avenues for raising capital funds and limited area of operation of the Primary (Urban) Co-operative Banks (UCBs) add to their financial vulnerabilities. A long-term solution to make the UCB sector financially resilient and to enhance the depositors’ confidence is to set up an Umbrella Organization (UO) as prevalent in many countries.”
This Statement which set out various developmental and regulatory policy measures said “ The UO, apart from extending liquidity and capital support to its member UCBs, would also be expected to set up Information and Technology (IT) infrastructure for shared use of members to enable them to widen their range of services in the wake of advances in information and communication technology at a relatively lower cost. The UO can also offer fund management and other consultancy services.
RBI also traced the history of how the idea was formulated: “The idea of setting up of UO for the UCB sector was first mooted in the year 2006 by the Working Group (Chairman: Shri N S Vishwanathan) set up by the Reserve Bank on Augmentation of Capital of UCBs. It was examined in greater detail by the Working Group on Umbrella Organization and Constitution of Revival Fund for Urban Cooperative Banks (Chairman: Shri V S Das) in 2009 and the Expert Committee on Licensing of New Urban Co-operative Banks (Chairman: Shri Y H Malegam) in the year 2011.”
“The need for UO has also been stressed by the High Powered Committee on UCBs (Chairman: Shri R Gandhi) in the year 2015” RBI admitted.
Thursday also saw reduction in the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.5 per cent to 6.25 per cent with immediate effect.