RBI Panel suggested turning Co-operative Credit Societies to Urban Co-operative Banks

RBI panel in September 2011 proposed that the existing well managed co-operative credit societies meeting certain financial criteria like profits, capital adequacy and NPA proportion be given priority for granting licences as urban co-operative banks (UCBs) particularly in unbanked or inadequately banked centres.

The panel headed by YH Malegam acknowledged the importance of urban co-operative banks for financial inclusion and suggested that new entrants should be encouraged to open banks and branches in unbanked or inadequately banked area. UCBs play a useful role and the panel felt a need for a greater presence of UCBs in unbanked districts and in centres having population less than 5 lakh.

It was also considered necessary to discourage new entrants from opening branches in districts and population centres which are already adequately banked. As far as capital requirement is concerned, the panel suggested minimum paid up capital of from Rs 50 lakh to Rs 5 crore depending on the area of operation.

the panel has recommended a minimum paid-up capital of Rs 5 crore for UCBs that wish to operate in more than one state after five years of successful operations. It also suggested that there should be segregation of the ownership of the UCB as a co-operative society from its functioning as a bank.

The RBI had announced in the Annual Policy Statement 2010-11 its intention to set up a committee comprising all stakeholders for studying the advisability of granting new urban co-operative banking licences.