Andhra Pradesh Federation of UCBs and Credit Societies has threatened to quit the Nafcub fold, should its concern not be addressed. Pointing to several recent moves of RBI, the federation, in its meeting, felt that the RBI is working at the game plan of forcing UCBs to convert into small banks.
In a letter Chitturi Ravindra, President of the state federation listed several moves by RBI detrimental to the interest of the UCB sector. Some of these are stopping branch expansion, prohibiting payment of dividend to members and diluting the cooperative character of UCB by allowing them to raise share capital through market in the recently amended BR Act.
The General Body meeting of Andhra Pradesh State Cooperative Urban Banks and Credit Societies in its meeting held on December 24, 2020 unanimously expressed that in such circumstances, the member organisations, which are answerable to their body of shareholders, are finding it difficult to continue their membership of NAFCUB, writes Ravindra.
These member organisation’s disappointment with the national organisation does not augur well for the future unity of Cooperative Urban Banks, he added.
All applications received from Urban Cooperative Banks for branch expansion from 2018-19, are kept pending. In addition to imposing an undeclared ban on branch expansion, RBI has effectively withheld granting any regulatory sanctions such as granting schedule status etc since the last few years even to banks meeting all the laid down criteria.
In the case of merger or taking over of a cooperative by another institution, the amendment in the BR Act enables Reserve Bank of India to formulate a scheme of merger or amalgamation irrespective of whether the shareholders or directors either the institution which is being taken over, or that of the Cooperative bank which is taking over, are in favour of such merger amalgamation or not.
The letter also objects to RBI on the issue of BoM. This additional tier in the administration of UCBs, without being answerable to the shareholders does not augur well for the future of Urban Cooperative Banks.
Reserve Bank’s decision conveyed vide circular dated December 4, 2020, to make the ban on declaration of dividend for the year 2019-20 permanent irrespective of performance of individual banks. This is not justified. The decision may lead to fight of share capital from UCBs with disastrous consequences, it states.
As all member Cooperative Urban Banks of NAFCUB realise, these are not unconnected acts, they are part of a larger scheme to persuade larger Cooperative Urban Banks to opt for becoming Small Finance Banks, and merge or liquidate the smaller ones.
However, we are sorry that NAFCUB has not bestowed the required seriousness to represent these issues and get them redressed, reads the letter. Later talking to Indian Cooperative Ravindran said “our concerns were also voiced by one of our Directors, Raghvendra Rao of VCB at Nafcub AGM held recently in Delhi”.
