New licensing regime for UCBs in the pipeline

Source: Business Standard

What is the news?

A brand-new licensing regime for urban co-operative banks (UCBs) is on the cards for financially sound and well-managed co-operative credit societies. This comes 17 years after the Reserve Bank of India (RBI) stopped issuing them. 

Expected Reforms in UCBs

• Constituting a board of management (BoM) for UCBs with deposits of over Rs 100 crore. BoM would have specialists drawn from accountancy, agriculture and rural economy, banking, co-operation, economics, finance, law, small-scale industry, and information technology
• Framing of modalities for a national umbrella organization
• Refresh of the National Cooperative Development Policy (2002)

N S Vishwanathan committee  

• The expert committee on primary (urban) co-operative banks, headed by former RBI deputy governor N S Vishwanathan, is expected to submit its report within a fortnight.  
• Its mandate is to take stock of the regulatory measures taken by the RBI and other authorities for UCBs and assess their impact over the past five years. 
• It will also identify key constraints and enablers in fulfillment of their socio-economic objective, and review the current regulatory and supervisory approach. 

The RBI’s Report on Trend and Progress of Banking in India about UCB’s 

• Co-operative banks, with their grass-root level customer base and domain knowledge, can attract new customers and retain existing clientele. 
• However, A change in outlook, processes, business model, and strategy are, required to achieve goals in a new development strategy that is in sync with the fast-changing landscape 
• On the technology front, more than 99% of them are now compliant with the adoption of core banking solutions norms. 

Terms to know:

• Banking Regulation Act, 1949
• Urban Cooperative Banks (UCBs)