Maha co-op banks seek withdrawal of recent RBI circulars on sector, cite existential issue

The Maharashtra Urban Co-operative Banks Federation on Thursday demanded the Reserve Bank should withdraw recent circulars on the sector, claiming they pose an existential issue. The Federation, which represents all the 494 of the urban cooperative lenders out of the total 1,552 in a state where their penetration is the highest, said fraud at one bank - PMC Bank - should not be held against the entire sector.

The RBI came out with a slew of regulations on the sector in the recent past, in order to avoid a repeat of an episode like the PMC Bank, which has been classified as a Rs 4,500-crore fraud. Vidyadhar Anaskar, chairman of the federation, said through circulars like limiting single borrower limits to 10 per cent from the earlier 15 per cent, insists on using only the core capital and not tier-II, insist to have half the portfolio for loans under RS 25 lakh and increase the priority sector lending limits to 75 per cent from 40 per cent earlier, as a ploy to forcefully turn such banks into private sector ones.

He said all these proposals are "impossible to achieve" and will sound a death knell to the sector which serves an important role in taking banking to the masses. Stressing that he respects the RBI, Anaskar said the federation will be conveying its views to the central bank and if necessary, also challenging it in the courts.

He said already, there is a move by New India Cooperative Bank to turn its character into a private sector lender, and added that the federation will be launching a public protest against the RBI's moves at the Extraordinary Annual General Meeting on January 18. Anaskar said in the past, the Federation has been able to prevail upon the shareholders of Cosmos Bank when there was a move to turn the character to private sector lender.

The urban cooperative banks have a better record on NPAs, capital buffers and also profitability as compared to the commercial banks due to which they should be allowed to thrive. He also asserted that the co-operative model has not failed but lenders have been fraught with fraud, demanding efforts to reduce the same rather than forcing entities to turn private.

Meanwhile, when asked about changes in the regulation, where the government is mulling to give the entire onus to RBI rather than splitting it up with state governments, Anaskar urged for the same to be handed over to Nabard fully.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)