MUMBAI: Without commenting on the specifics of the Punjab and Maharashtra Co-operative Bank (PMC Bank) episode, Reserve Bank of India governor Shaktikanta Das said a lone incident should not be taken to generalise the health of the entire co-operative bank system. He said the central bank would not allow any co-operative bank in the country to collapse.
“This (PMC Bank) case is already under investigation. As soon as this issue came to our notice, RBI has acted very swiftly and very promptly,” Das said. Co-operative banks develop problems for their own set of reasons, and based on this particular experience, RBI will give a fresh look at the regulatory framework that is in existence, the RBI governor said.
Board of management for urban co-operative banks has been for long nudging Urban Co-operative Banks (UCB) to transform into small finance banks (SFB), as letting them be under the dual control of respective state governments and the RBI has been a problem. Even in the latest circular on “on tap” SFB licences, RBI had given the UCBs option to convert. But, so far, not a single UCB seems to have taken up the offer.
“On their own, they have not come forward. According to the structure of co-op banks, they are not shareholders, they are members. So therefore, there are legal issues also involved. Whatever changes are required, we will, based on our internal review, take it up with the government,” Das said.
RBI had also proposed that co-op banks move towards setting up boards of management that would work under the central bank, an umbrella organisation for UCBs to make them “financially resilient and to enhance depositors’ confidence”.
In general, the governor wanted to send out a message that the Indian banking system remains sound and stable. “There is no reason for any unnecessary panic. Sometimes unnecessary rumours can create a panic situation,” he said. On the troubles some of the Non-Banking Financial Companies (NBFC) have been facing since last September, Das said the scrutiny on the top 500 NBFCs is intense and that he hoped “we do not encounter a failure of another large NBFC”.
Interim dividend, what?
Mumbai: Reserve Bank Governor Shaktikanta Das on Friday scotched media reports that the government might seek an interim dividend of Rs 30,000 crore from the central bank to meet its revenue shortfall after the massive tax cuts. As per media reports, the government might seek an interim dividend from the RBI towards the end of the financial year so that it could meet the fiscal deficit target of 3.3 per cent. “I have also seen it in the media. That apart I am not aware of any such demand from the government for payment of interim dividend,” Das said.