The RBI’s regulatory sword of Democles hangs over scores of Indian cooperative banks across the country. The apex bank peeved by their run down financial situation, mismanagement and irregular financial transactions may soon clamp down on their operations if they failed to meet minimum capital and reserve requirements by the 30th June deadline.
The move is likely to affect thousands of depositors belonging to these banks.
Most of these banks operate at the district level save for the three that operate at the state level. It bears repetition that the RBI had earlier given several extensions to these banks to improve their capital base.
Nabard that regulates these banks has always held that the banks are not able to raise necessary funds because they are poorly managed and not receiving help from their respective govts.
According to the Nabard, these banks require a little more than Rs. 2000 crore to meet the 4 percent capital adequacy ratio stipulation.
The apex bank has always insisted on cooperative banks achieving minimum eligibility benchmarks as recommended by a committee chaired by former RBI deputy governor Rakesh Mohan.
Sources say the country’s cooperative banking sector could be barely be given a clean bill of health as it is riven by problems such as gross mismanagement and alleged misappropriation of funds by corrupt politicians. That is why the question of whether these banks should at all be allowed to continue with their banking operations is being asked by experts, the sources add.