Admitting that cooperative banks are playing an important role in the rural economy the Governor of RBI Raghuram Rajan stressed on its professionalization. There is a need for stronger governance and greater accountability within the cooperative banking sector, he said while inaugurating the Conference of the Chief Secretaries, Finance Secretaries and select Cooperative Secretaries of States in Mumbai on Monday.
Mr U.K. Sinha, Chairman, Securities and Exchange Board of India (SEBI), Dr. Harsh Kumar Bhanwala, Chairman, NABARD also addressed the conference.
Shri Harun R. Khan, Dr. Urjit R Patel and Shri S.S. Mundra, Deputy Governors, Comptroller General of Accounts (CGA), senior officials of the Ministries of Finance and Corporate Affairs, NITI Aayog, the Reserve Bank and SEBI attended the conference.
He highlighted the need for improvement in governance structure, capitalisation and resolution mechanism in the cooperative banking sector which plays a crucial role in credit flow to disadvantaged groups, especially in rural areas.
He stated that without efficient governance, capital infusion would not benefit the sector, as it would function as a ‘leaky-bucket’.
He also emphasised the need for prompt corrective action and much stronger accountability in the co-operative banking sector.
He suggested evolving of effective resolution mechanism, such as, the “good bank-bad bank” model in which good parts of the bank could be identified and segregated from the bad and the bad part could be dealt with appropriately.
The RBI in its last annual report had identified cooperative banks as one of its areas of focus. In January, the central bank had set up a committee to re-examine and recommend appropriate set of businesses, size, conversion and licensing terms for the urban cooperative banking sector.