RBI’s Expert Committee on Primary (Urban) Co-operative Banks has submitted its report which, among others, lays down a roadmap for growth and development of the sector. The report was compiled under the chairmanship of N S Vishwanathan, former Deputy Governor.
The exhaustive report has about 10 chapters and a Vision Document which says the Primary (Urban) Cooperative Banks (UCBs) play an important role in furthering financial inclusion by generally providing traditional, if not the more modern, banking services to persons in the less included segments of the economic strata.
The Expert Committee says there is a need to understand the heterogeneity of the sector and frame regulations to harness the USP of each sub-segment. The UCB sector displays extreme heterogeneity.
There are a large number of small UCBs which embrace cooperative principles and these banks may be allowed some operational freedom, but they should not be left to drift away from the inclusive finance model.
At the other end of the spectrum are very large UCBs, a few of which are larger than some of the smaller commercial banks permitted to function as universal banks. The legislative changes, which not only provide greater powers to the RBI but also additional capital raising opportunities for UCBs, should be used to allow such banks to grow within the cooperative structure.
The EC also felt that Umbrella Organisation should be expedited and empowered as it can and should be seen as a game changer for the sector and (NAFCUB) should expedite the process of setting it up.
The UO should be financially strong and be well governed by a professional board. The UO should provide cross liquidity and capital support to the UCBs when needed, as well as the cloud services for facilitating IT-enabled operations by the member banks.
The UO should be the branding partner for the member UCBs and both because of this and the business model itself, the UO has a significant systemic role. It should therefore be regulated and supervised closely. Recognising the important role of the UO in providing operational and financial strength to the smaller UCBs, the differentiated regulation should have a built-in incentive for the smaller UCBs to join in.
EC notes with satisfaction that the number of borrowers of UCBs is 67 lakh. This is not a small number by itself and there are many cases of transformational changes that UCBs have brought to its customers.
While Nafcub President Jyotindra Mehta is the lone member from the UCB sector, the Expert Committee has a Chairman, six members and a convenor. Besides Vishwanathan, Harsh Kumar Bhanwala, the former Chairman of NABARD, Mukund M Chitale Chartered Accountant, retired IAS officers NC Muniyappa and RN Joshi IAS (Retired), Prof MS Sriram, IIM Bangalore, Jyotindra M. Mehta- President of NAFCUB (National Federation of Urban Cooperative Banks and Credit Societies) are the members.
Neeraj Nigam- Chief General Manager-in-Charge of RBI’s Department of Regulation is convenor. The Committee’s Report has been placed on the RBI website for comments of stakeholders and members of the public.
Comments on the report may be submitted by September 30, 2021 through email. RBI will examine the comments and suggestions before taking a final view on the recommendations made by the Committee, reads RBI release on the issue.