UCB Will Be Monitored By A Self-Regulatory Agency

UCB will be monitored by a self-regulatory agency, RBI committee gives the roadmap for change.

After the irregularities of PMC came to the fore, the efforts of RBI and the central government to reform the Urban Co-operative Bank (UCB) started, the exercise is going to intensify.

If the central bank goes, then an apex organization can be formed for the urban cooperative banks of the country with a minimum capital base of three hundred crore rupees.

This organization or urban body will work as a self-regulatory agency in the urban cooperative banking sector.

This can help in the integration of small UCBs in the entire urban cooperative banking sector and establish them as large banking companies.

The report of the expert committee constituted to give suggestions on improving the condition of urban cooperative banks was made public by the RBI on Monday.

Recommendation for bifurcation of co-operative banks into four phases.

The committee has recommended the arrangement for the regulation of urban cooperative banks by dividing them into four phases. The first category includes UCBs having deposits of Rs 100 crore.

The second category includes UCBs with deposits of Rs 100-1000 crore, the third category is Rs 1,000 crore to Rs 10,000 crore and the fourth category includes UCBs with deposits above Rs 10,000 crore.

It said that if the UCB wants to convert into a joint capital company, it should be encouraged. This means that UCBs can be allowed to be converted into commercial banks subject to conditions.

The bottom line of the report is that the way it was going on in UCB till now, it will not go ahead.

1500 UCBs in the country now

In the recent two years, many steps have been taken by the Central Government and RBI to improve them, but dozens of more suggestions have been given by the Expert Committee.

Most importantly, the Committee recognizes that UCBs have utility despite the drastic changes in the banking sector. There are 1500 UCBs in the country at present.

The committee is of the view that there is a need for large-scale integration among them, but at the same time, the path of granting licenses of new UCBs can also be opened further.

Not only this but it has also been recommended to give an opportunity to the UCBs whose performance is better, to expand in other areas.

It is also suggested to give the right of regulation to the apex body which has been talked about for the entire sector.

Later this body can also be converted into a universal bank in which other partner banks have a stake. The body will look after the capital requirement of other UCBs etc. at a later stage.