The federation said it will launch a public protest against the new norms at the Extraordinary Annual General Meeting to be held on January 18.
Maharashtra Urban Cooperative Banks Federation, that represents a third of the country's urban cooperative lenders, on January 16 called for a rollback of regulations that came into effect post- PMC Bank episode.
Thefederation said it will launch a public protest against the new norms at the Extraordinary Annual General Meeting to be held on January 18.
Urban Cooperative Banks (UCBs) hold total assets of around Rs 6 trillion in India. Over the past month, the Reserve Bank of India (RBI) proposed to strengthen some regulations concerning cooperative banks after the PMC Bank fraud unfolded in September 2019 and created nation-wide furore.
The RBI on December 30 released draft circular on lending norms for UCBs. The circular stipulates limits for a single borrower and a group of connected borrowers to be at 10 percent and 25 percent, respectively, of their tier-I capital and at least 50 percent of their loan portfolio shall comprise loans not more than Rs 25 lakh per borrower. The banking regulator has invited comments on the draft circular by January 20, 2020.
While the RBI said that the move is aimed at reducing credit concentration risk of the UCBs and promote financial inclusion, the federation claims that most UCBs won't be able to survive the new norms.
Vidyadhar Anaskar, Chairman, Maharashtra State Co-operative (MSC) Bank and Maharashtra Urban Co-operative Banks Federation, said that the PMC Bank crisis was the result of a fraud perpetrated by the bank officials and not a sector-wide issue.
On the issue of dual regulation by the state and RBI, Anaskar said that it would be in the interest of UCBs if they were regulated by NABARD instead of the RBI that primarily oversees commercial banks.NABARD is wholly owned by the central government since the RBI gave up its stake in the agricultural lending regulator in February 2019. Anaskar said that NABARD has better understanding of UCBs operational area as compared to the apex bank.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.