Budget Expectations: UCBs be included in Mudra & PM Awas Yojana

Releasing his Wish List, NAFCUB President Jyotindra Mehta has demanded a separate department for the UCBs in the Ministry of Finance, among others. Mehta says that the DFS in the Finance Ministry while having all the expertise in respect of cooperative banks in the rural credit side, are not that familiar with the UCBs and credit societies.

It is desirable to have an exclusive department or desk for the UCB sector as the Finance Ministry has to interact with RBI and state governments as well as the sector that comprises 1539 urban cooperative banks, says Mehta. NAFCUB has also requested RBI to have an exclusive department for UCBs as it was having before which was called UBD.

The UCB sector has loans of over Rs. 82000cr to the MSME Sector but almost all of them are not under the guarantee cover that is being enjoyed by commercial banks and NBFCs. It is submitted that all the existing micro and small enterprises who are customers of the UCBs be kindly made eligible for emergency support extended to the enterprises under the GECL or any other scheme announced by the Government, reads the letter from the Nafcub President.

Further, he says “All Urban Cooperative Banks (Scheduled and Non-Scheduled) may be included as Prime Lending Institutions to avail the subsidy under the Pradhan Mantri Awas Yojana so that UCBs may also help and contribute in fulfillment of Government’s Mission “Housing for All”.

Mehta also says Urban Cooperative Banks which are an important part of the banking system and extend loans and advances to micro-enterprises have been excluded from the MUDRA scheme. It is therefore submitted that all UCBs may be included in the MUDRA Scheme for providing finance to the entrepreneurs and to get refinance under the Scheme.

Nafcub also demands Policy to encourage and permit the formation of new UCBs in all the districts in the country with special emphasis on J&K and NE states. Almost 70 percent of urban banks are concentrated in 3 states -Maharashtra, Gujarat, and Karnataka. RBI has put on hold the formation of new UCBs since 2004. There is a need to encourage the opening of new urban banks in big states like UP, Bihar, MP, Odisha, and others so that the micro-enterprises get help and employment is generated.

Nafcub president also talks of Umbrella Organization for UCBs and says it will prove to be a game-changer for the sector. RBI is already open to considering converting the UO, which is initially being licensed as an NBFC, to be converted to a full-fledged bank in about 5 years. It is the desire of the sector that the UO grows to eventually become a one-stop-shop for the entire cooperative sector.

“RBI may also be advised to provide financial support to UO for creating a strong information technology infrastructure for UCBs”, concludes Mehta’s piece.