Vidyadhar Anaskar, Chairman of the Administrative Board of MSC Bank and a senior banking expert, has cautioned that the Reserve Bank of India’s initiative to draft Model Bye-laws for Urban Co-operative Banks (UCBs) could significantly alter the character of the cooperative banking sector, gradually transforming UCBs into institutions operating on corporate lines.
Commenting on the RBI’s recently constituted expert committee, Anaskar observed that cooperation is a State subject and the authority to frame model bye-laws traditionally rests with the Registrar of Co-operative Societies.
He warned that incorporating provisions similar to those applicable to commercial banks could create legal and operational challenges for cooperative banks.
While the proposed reforms could improve professionalism, governance, transparency, capital mobilisation, and depositor confidence, Anaskar said the committee’s biggest challenge would be balancing the cooperative principle of “one member, one vote” with the Banking Regulation Act’s emphasis on depositor protection.
He also cautioned that the changes could gradually reduce members’ influence and increase compliance burdens, particularly for smaller UCBs.