NEW DELHI: In order to ensure better management of urban cooperative banks, the Centre is planning aggressive consolidation drive for the urban cooperative and is considering roping in Niti Aayog for it.
According to the sources in the finance ministry, the government in consultation with the RBI is planning to reduce the number of urban cooperative banks by one third in next few years.
“Post-PMC Bank crisis, the finance ministry is working closely with the RBI on regulating Urban Cooperative Bank. There are many banks that are having financial stress. The RBI and finance ministry has initiated many reforms but still, there is a need to aggressively consolidate by merging them into a larger entity. The central ministry is considering taking help of Niti Aayog for the purpose,” a senior official told TNIE.
The official added that NITI Aayog is expected to give the first list by September this year. “The process once initiated, by September there will be a list of the first slot of UCBs ready, which can be merged or privatised,” the official added.
By the end of last financial year, there were 1,539 UCBs and 97,006 rural cooperative banks, with a depositor base of 8.6 crore. The Reserve Bank of India, on Wednesday, issued a draft, proposed changes in rules for members of primary urban cooperative banks and it also proposed to tweak the fundraising norm for the UCBs.
They had already tweaked the rules on the appointment of managing directors and chief risk officers while they increased instances of imposing fines for shortcomings and mandating stricter reporting norms. After the RBI was given greater regulatory powers over these lenders, it has tightened noose over cooperative banks.
Aggressive drive in consultation with RBI
- Till FY20, there were 1,539 UCBs and 97,006 rural cooperative banks, with 8.6 cr depositors
- Govt plans to cut the number of urban cooperative banks by one third in next few years
- RBI imposed penalties on 51 cooperative banks till June 30 this year, compared with 23 in 2020