NAFCUB convened a meeting of all state level Federations of Urban Cooperative Banks (SFs) recently in New Delhi, primarily to elicit views of representatives of State Federations on formation of National Level Umbrella Organisation for Urban Cooperative Banks. In all 31 delegates from across the country representing State Federations of Urban Cooperative Banks and credit societies participated in the meeting.
V.S. Das, ED, (Retd), RBI, Chairman of Working Group constituted by RBI on formation of Umbrella Organisation for UCBs and. D. Krishna, Former Chief Executive, NAFCUB and one of the members of the Working Group were invited as Special Invitees to address the participants. Shekhar Charegaonkar, State Minister , Maharashtra State Cooperative Council was the Special Invitee to the meeting.
Jyotindra Mehta, President NAFCUB welcomed all the participants and explained the background for calling the meeting. He said the need for formation of National Level Umbrella Organisation for UCBs derives from the fact that Urban Cooperative Banks are self- reliant but do not get support from the Government in case of liquidity crisis whereas all Public Sector Banks get the support from the Government in case of need. Where should UCBs go to seek help in case of liquidity crisis particularly the smaller ones? This question, time and again, has been the issue of debate/concern for the UCB Sector.
Moreover, due to dual control, the process of merger/liquidation of weak/sick banks is very lengthy and cumbersome with the result the depositors face lots of problems in getting back their hard earned money. The same process in case of commercial banks which are directly under the control of RBI become simple and merger of weak/sick bank is quick and smooth.
Narrating background of the issue Mehta said that in case of UCBs, the concept of formation of Umbrella Organization and constitution of revival fund for UCBs was conceptualized on the recommendations of Working Group constituted by RBI to examine issues relating to augmentation of capital in UCBs. The Working Group observed that it would be necessary to facilitate emergence of Umbrella Organisation for UCBs to enhance public confidence in the sector.
Accordingly, RBI in 2008 constituted a Working Group under the chairmanship of Sh. V.S. Das, the then Executive Director, RBI, to suggest measures including the appropriate regulatory and supervisory framework to facilitate emergence of Umbrella Organization for UCB Sector in the respective State and constitution of Revival Fund as prevalent in other parts of the world. The Working Group submitted its report in October 2009 and recommended for a professionally managed National Level Umbrella Organisation to provide a range of services to UCBs on the same line as done by Umbrella Organisations for credit unions in several countries.
Subsequently, the Malegam Committee (The Expert Committee on licensing of new UCBs) was constituted in the year 2010 reviewed the Das Committee Report and recommended that there should be two separate Umbrella Organisation (i) a national level organisation to provide payment and settlement services and other services normally provided by central banks as also liquidity support to its members and (ii) one or more state level organisations or outside agency to provide Management, IT, Training and services which the UCB Sector needs.
The High Powered Committee on UCBs (Gandhi Committee) constituted in January 2015 submitted its report in July 2015 has also mentioned about the importance of having Umbrella Organisation for the sector and recommended to RBI to expedite the formation of the same.
He said NAFCUB had in the past submitted its views on various aspects related to formation of Umbrella Organisation and various meetings with RBI were also held to discuss the issue. However, nothing concrete had happened. While some of the State Federations and NAFCUB are already playing the role of UO II and providing management, IT and training related services to UCBs, the constitution of Revival Fund and Emergency Fund facility for providing liquidity support seems to be more important.
There was consensus in the meeting that UO II should be formed at the State level by State Federations and UO I should be formed at National level by NAFCUB to provide liquidity support to UCBs in case of need. All the Federations assured their full support to NAFCUB for this initiative.