The Nafcub Board meeting on Wednesday applauded its President Jyotindra Mehta for his “Note of Dissent”, submitted to RBI’s Expert Panel Chairman, of which Mehta himself is a member.
Submitting the note of dissent is not a common practice in the working of RBI’s committees and it was perhaps this that led the Nafcub Board members consisting of H K Patil, Vidhyadhar Anaskar and others to lauding Mehta for his bold stand.
Talking to Indian Cooperative, Mehta, however, lauded several recommendations of the Panel such as removal of BoM clause, etc and said these will go a long way in removing shackles off urban co-operative banks. But he has reservations about certain issues which took shape in the note of dissent, submitted by him to the
Chairman of the Panel.
Lauding some of the other recommendations of the Panel Mehta said there are only 48 scheduled banks in the UCB sector and the situation may change soon with the Panel allowing any UCB to become one if it fits meets the criteria.
The issue of revaluation of UCB buildings on the lines of commercial banks and factoring them in CRR calculations was another issue Mehta is proud of. Recommending UCBs to participate in govt business such as Mudra loan or interest subvention are also welcomed, added Mehta.
“With the removal of the clause of BoM, UCBs will be free for branch expansion. But for issuance of a new license we have to wait till the Umbrella Organization takes shape, said Mehta, hinting at a quick pace at which Nafcub is working to achieve the milestone.
Mehta in his dissent note says “the Report includes many recommendations that I had opposed and even the sector is not in favor.” Mehta’s objections covered a gamut of issues concerning UCBs.
Mehta listed “Problems arising in implementing the B R Act after amendment. He objected to RCS/CRCS jurisdictional issues arising out of the Banking Regulation (Amendment) Act 2020. Mehta felt the need for a committee to examine the issues and both sides agreeing to a road map of implementation.
Mehta also disagreed with the endorsement of the idea of voluntary conversion of UCBs to joint-stock
companies. It militates against the very purpose and concept of cooperation, his note reads.
Mehta also disagreed on Regulatory Prescriptions and felt that for the UCBs belonging to various tiers, an appropriate prescription should be made. He also objected to the loading of 2.5 per cent. “While the prescription of 9 per cent CRAR is alright, I do not agree with the loading of 2.5 per cent, both for not meeting the minimum capital norm and for not being a member of UO. This should be 1 per cent so that the maximum requirement of CRAR is not more than 11 per cent for Tier I banks”, his note reads.
“My dissent is on the fact that there is no clarity in recommendation as to how the present problem of TACFUB having become ineffective with the introduction of SAF is to be solved. TAFCUB is still an important forum to bring all the stakeholders together, notwithstanding the primacy that the Banking Regulation Act amendment confers upon RBI’, his note reads.
On Umbrella Organisation Mehta said he does not agree with the recommendation on UO that for Tier III and Tier IV banks there should be no nudge to become UO members and that for them it should be completely voluntary. If 1451 UCBs (Tier I and Tier II) are benefitted from UO, 88 remaining Tier III and IV banks will also stand to gain. As the banks with sizable resources, they should be nudged to become members of UO by imposing 1% extra CRAR for not becoming members, reads Mehta’s note.
Mehta’s Note of Dissent could be accessed by clicking on the following link-
