Many persons approach the office of Indiancooperative.com to find out what is happening on the fronts of granting licence to Urban Cooperative Banks. We decided to find out the truth from horse’s mouth.
Mr Mukund Abhyankar, Member of the Malegam Committee which was entrusted with the job of doing a threadbare analysis of issues and suggest recommendations for the grant of licence was kind enough to have consented for an interview.
Mr Abhyankar is a renowned cooperative leader of Pune who has made his presence felt across the cooperative world of the country. Having been Chairman of Cosmos Bank a number of times in the past he is still one of its directors. Cosmos Bank is number two in the UCBs ranking after the Saraswat Bank
We produce below the excerpts
Q : When are the recommendations of the Malegam report to be translated into action? In short, at what stage the report exists presently.
A: As per rules and practices, recommendations of every committee appointed by the RBI are submitted to the RBI for further action. About the Malegam Committee also, its final report has already been submitted to the RBI on 18th August, 2011 by the Chairman of the Committee.
The RBI must now be considering it and hopefully within a couple of months should come out about accepting / not accepting, partly or fully, the report. I, as a member of the Committee, am not supposed to say anything about this. Naturally, I am unable to tell you at ‘what stage the report exists presently’.
Q It talks of BoM. Will it not interfere with BoD? Or would having two centers of power cause inconvenience for the working of the bank?
A: The BOM will certainly not interfere with the BoD. There will not be two centers of power causing inconvenience whatsoever for the working of a co-operative bank. This is how both are going to work.
Constitution (eligibility, election, tenure, cessation, etc) of the Board of Directors is and shall remain under regulation and control of the respective Registrars of Co-op. Societies (and in turn vide respective Co-operative Society’s Acts).
The appointment of member of the Board of Management is to be made by the above Board of Directors vide eligibility criteria prescribed from time to time by the RBI. If the elected members on the Board of Directors are fulfilling such eligibility criteria, then all such members can simultaneously be members of the Board of Management. In effect, both appointment and removal of the Board of
Management members is the authority of the Board of Directors.
The Board of Directors shall frame the policies in all respects to be thereafter implemented by the Board of Management. In other words, the day-to-day functioning of the UCB through the CEO shall vest in the Board of Management. The Board of Management can never over-ride or flout the Codes and Policies fixed by the Board of Directors.
In this manner the Board of Management can never interfere with the Board of Directors but can work harmoniously. In other words, the Board of Management should be seen and taken as a sub-committee of the Board of Directors and can have insiders if they fulfill the eligibility criteria.
Q Clarity regarding constitution of BoM such as “could the directors of Board be member of BoM”? Would the existing chairman continue to have influence on their bank as they had in the past?
A: Clarity regarding ‘could the Director of the Board be a member of BOM’ is already explained in my reply to Question No. 2 above.
Q According to the report each bank needs to have a cooperative society. And there would be two entities society and bank. How easy or difficult would it prove for the existing banks?
A: The report has nowhere stated that “each bank needs to have a co-operative society”. Therefore further doubt about the two entities – society and bank – and also about difficulties feared by the existing banks does not arise at all.
Q Clarity regarding Umbrella Organisation of UCBs. Would it be created within the RBI or would be a separate entity controlled by the RBI or it would be entirely an autonomous body?*
A: Umbrella Organisation shall be a co-operative society registered under the Multi-State Co-operative Societies Act, 2002 of the Government of India. Even though the Malegam Committee recommendations regarding the Umbrella Organisation if accepted by the RBI, suitable amendments in the Banking Regulation Act 1948 will have to be made, which shall be the duty of the RBI and the Government of India.
All the non-scheduled urban co-operative banks in India (at present more than 1600 in number) shall be the compulsory members of this Umbrella Organisation. This Umbrella Organisation which shall be a bank at the national level shall be the only organisation for the entire country and there shall be no state level other organisations discharging the banking functions.
The main functions of this Umbrella Organisation are narrated in the report. Briefly, it can be said that providing temporary liquidity to the member UCBs shall be the main function of this Umbrella Organisation. The funds required for providing temporary liquidity shall be mobilised from member UCBs who shall be permitted to keep their CRRs with this Umbrella Organisation bank.
As recommended in the report, this Umbrella Organisation shall have an elected Board of Directors (as required under its own bye-laws to be registered with the Central Registrar of Co-operative Societies). It shall also have a Board of Management to look after the day-to-day banking business.
Therefore as asked in the question, it will not at all be created within the RBI. On the other hand, it would be a separate autonomous body but being a bank will be controlled and regulated by RBI under the provisions of Banking Regulation Act, 1948. Therefore the doubt whether it will be created within the RBI will not be proper.
Q Do you see getting licence would be tough/easy compared to the past after the recommendations are accepted?
A: Getting a license for new UCB will not at all be tough if the new UCB wants to commence its business in unbanked/low banked areas. However if it wants to operate in the metropolitan or partly populated urban areas, A & B then it will have to raise additional share capital as prescribed by Entry Point Norms.
This is because the Malegam Committee has recommended that the new UCBs should come mostly in unbanked/ low banked areas instead of adding to the already overbanked areas.