Urban cooperative banks are peeved over RBI’s continual refusal to grant license for opening up new branches. They find it all the more discriminatory as commercial banks face no such restrictions even when their financial parameters are not as strong as that of the UCBs.
It is difficult to compete in the market with this kind of restriction, said a number of cooperators to Indian Cooperative. This delay for the current year will only further add to the constraints of competing with other entities in the field, leaders say.
RBI’s take on the matter is that the extant policy on Branch Authorization is under review and as such all the applications received from UCBs for opening of branches under Annual Business Plan 2018-19 have been kept pending.
Though RBI has also communicated to those Urban Cooperative Banks who have applied for branch licensing about this, NAFCUB leaders hold that the denial of branches to UCBs in the past (2003-08) had adversely affected the growth of urban banks.
They also remind that urban co-op banks are the only banks that are given a number of conditions to qualify to apply for branch license. “The concept of quantifiable parameters to be declared as FSWMB exists only in UCB sector and that has been made a precondition for applying for a branch licence and submitting an annual business plan”, NAFCUB leaders said to the RBI’s Deputy Governor in Mumbai in their meeting recently.
Recently, fulfilment of new PSL targets have been made another precondition for a UCB being eligible to submit its annual business plan. Then there is another requirement of RBI not having any penalty during the preceding one year for any reason to get to open a branch in the next 2 years.
To top it all UCBs have received draft guidelines on constitution of BOMs in urban banks which prescribe denial of expansion if a bank does not constitute a BOM within given timeframe. This is not withstanding the fact that BOM is a concept that has been strongly contested by the sector for being impractical and not fitting into cooperative way of governance.
RBI is seen to be inclined to prescribe all and sundry conditions to prevent an urban cooperative bank from expanding, they argue. Commercial banks, on the other hand, are free to open branches and need only to inform the RBI post facto of having done so, irrespective of whether they are PSL compliant or not, or whether they have been imposed monetary penalty or not.
It is highly discriminatory for UCB sector only to be imposed so many conditions for a normal business activity of natural expansion which is not in keeping with the aim of Regulator of moving towards uniform regulation of all segments of banking industry , the sector’s leaders say.
All these are all the more hurt to the sector, when it finds that its performance in health parameters is way better than that of the PSBs which still account for over 65% of the total business of banking sector, they reminded.
In their meeting with RBI Nafcub leaders requested that such regulations that constrict the growth of sector may kindly be replaced with more supportive regulations in general. In particular, in respect of branch expansion, all banks other than those which are placed in grade IV be permitted to submit their annual business plan without any restriction.
It is also specifically requested that the conditions of being FSWMB, not having been imposed any monetary penalty, non fulfilment of PSL be not made preconditions for branch expansion. It is further suggested that all FSWMBs be treated at par with commercial banks and be allowed to open branches in the same manner as commercial banks are permitted.