RBI sets up working group to revive cooperative bank sector

The Reserve Bank has set up a working group to advocate ways for strengthening the financially weak and unviable urban cooperative banks (UCBs).

The Working Group is headed by RBI's Executive Director V S Das with 10 other members. The committee will do research and study the structure of existing umbrella organizations of financial co-operative institutions in other parts of the world and scrutinize the need and scope for a united structure for UCBs at the state level.

The Standing Advisory Committee for UCBs suggested that will also look for the possibilities for the revival of the funds for the sector.

In a notification issued by the apex bank it stated as large number of financially weak UCBs are posing a systemic risk to the cooperative banking sector hence there is “a need was felt for an umbrella organization for UCBs that will be in a position to channelise their (both weak and strong UCBs) resources, aggregate their needs and also lend credibility through mutual support in the financial market".

The banking regulator added however, there are a number of financially strong and viable UCBs. Hence some sort of cooperative bonding and mutual support system can make the sector strong and vibrant.

The working group expects by the umbrella organization public confidence will also get strengthened in UCBs. RBI informed the group will be taking into consideration international best practices and experiences while recommending supervisory and regulatory framework.

The group will be submitting its report within three months of the first meeting. The group will be provided necessary secretarial assistance by the Urban banks department along with central office of RBI.