RBI sets up panel to strengthen, consolidate urban co-operative banks

The Reserve Bank of India on February 15, 2021, established a committee for drawing a vision document to strengthen urban co-operative banks and to explore the potential of consolidation in this sector.

The eight-member panel will be headed by the former Deputy Governor of Reserve Bank of India NS Vishwanathan and will also include the former Chairman of National Bank for Agriculture and Rural Development- NABARD Harsh Kumar Bhanwala. The Committee will also require to submit its report to the RBI in three months.

As part of the statement on the Developmental and Regulatory Policies released on February 5, 2021, the RBI had announced setting up of an Expert Committee on urban co-operative banks for examining the issues and for providing the road map to strengthen the sector, leveraging on the recent amendments made to the Banking Regulation Act, 1949.

What will be the role of the Committee set up by RBI?

• The panel will suggest effective measures for the faster resolution and rehabilitation of the Urban Co-operative banks. It will also assess their potential for consolidation in the sector.

• The panel will be drawing up a vision document for resilient and vibrant urban co-operative banks having regard to the principles of cooperation as well as the systematic issues and interests of the depositors.

• The committee will review the current regulatory and supervisory approach and will recommend suitable measures to strengthen the sector while taking into account the latest amendment to the Banking Regulation Act, 1949.

• It will also take stock of the regulatory measures taken by RBI and other authorities in respect of UCBs and will be assessing their impacts over the last 5 years to identify the enables and key constraints in fulfillment of their social-economic objectives.

• The panel will also consider the need for differential regulations and will examine prospects for allowing more leeway in the permissible activities for co-operative banks with a view to enhance their resilience.

Cooperative banks under the supervision of RBI:

Following the amendment in Banking Regulation Act, 1949, all the urban co-operative banks and multi-state cooperative banks have now come under the supervision of the Reserve Bank of India.

There are 58 multi-state cooperative banks and 1,482 urban co-operative banks. They have about 8.6 crores depositors with a total savings deposit of about Rs. 4.85 lakh crores.