Co-op banks can become small finance banks, says RBI

Co-op banks can become small finance banks, says RBI

News:

1. The Reserve Bank of India in its recent monetary policy statements announced to allow urban co-operative banks (UCB) to convert into small finance banks (SFB).

Important Facts:

2. The Reserve Bank of India has decided to allow voluntary transition of urban co-operative banks (UCB) into small finance banks (SFB).
3. UCBs had been facing financial trouble couple of years ago which led RBI to stop issuing fresh licenses to UCBs.
4. The monetary policy has noted that the performance of UCBs has improved recently while their numbers have come down due to mergers and closures.
5. UCBs currently face regulation by both the RBI and the respective State governments.
6. The conversion of UCBs into SFBs will allow them to be regulated only by the RBI.
7. The Reserve Bank of India has also allowed all banks to spread their mark-to-market losses for the April-June quarter
8. The Reserve Bank of India has decided to grant banks the option to spread the mark-to-market (MTM) losses on investments held in ‘Available for Sale’ and ‘Held for trading’ portfolio for the quarter ending June 30, 2018,
9. Rising bond yields have resulted in mark-to-market losses for banks because Bond yields and prices are inversely related.

10. Co-operative are the bank that holds deposits, makes loans and provides other financial services to cooperatives and member-owned organizations.