Monday, December 9, 2019

RBI may become the Sole regulator of large UCBs



The large Urban Co-operative Banks(UCBs) might come only under the provisions of Banking Regulations (BR) Act while smaller UCBs are to remain in the exclusive fold of Registrar of Co-operative Societies (RoCS).These changes will bring forth a finale for the much debated problem of dual control of UCBs, which has been in trend for the past 54 years. These banks came into the scope of the RBI when some of the provisions of the BR Act was extended to them effective from March 1996 even though RoCS remained in power of the functioning of their boards and management.
In the revised setup, the inspection of the UCBs will be done solely by central and those of others will be carried out by the RoCS. But both large and small categories of UCBs will get cover from the Deposit Insurance and the Credit Guarantee Corporation.
The new framework will affect 1551 UCBs which had a total business of 7.36 trillion Rupees according to the last consolidated RBI’s report on Trend and Progress of banking in India, 2017-2018, out of which 4.56 trillion Rupees were deposits and 2.80 trillion in advances.
A source has told the Business Standard that the RBI and the Ministry of Finance are in advance talks  and any changes are yet to be include in the unnamed(as of now) Bill. The Bill is likely to be introduced in this session of parliament. The Dual regulation is expected to go off with this bill. The ministry handling the UCBs is the Ministry of Agriculture and the state governments also have some say.
Attention has been drawn to the fact that, the suggestion by R Gandhi Committee (2005), which set the threshold of business size of Rs.20000 crore for conversion into commercial bank could be revisited and even those below this point may be brought under the BR Act. This is also in line with the committees view with a slight degree of difference that such a conversion need not be made for a particular day and UCB’s growth in terms of branches, area of operation and business line can be marked to restricted unrestrained growth.
The larger UCBs have no option but to convert into a scheduled commercial bank over a period of time. The conversion into a small finance bank(SFB) is out of scope due to the restrictions under the licence terms, which in turns restricts the ticket size of loans and nature of business they can undertake.
The RBI has given the UCBs access to its Central repository of information on large credits as an attempt to make the database available to a larger audience in financial sector stakeholders, meanwhile indicating what is in store for the UCBs. The UCBs which are to come fully under the BR Act will be subjected to Basel III guidelines ,as of now they are under the Basel I guidelines. The only conversion till date of a UCB into a commercial bank is of DCB bank in 1996 which was not a forced one.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.