We have to come out of it: Shah calls for better RBI-UCB relationship

Union Cooperation Minister Amit Shah urged urban cooperative banks to change their perception of the RBI, citing its recent support for the sector. He also called for all 1,400 UCBs to join NUCFDC, highlighting its benefits in technology, compliance and cybersecurity

Mumbai: Union Minister of Cooperation Amit Shah on Saturday urged urban cooperative banks (UCBs) to look at the RBI from a “different viewpoint”, underlining that the central bank has “proactively helped” the sector in recent times.

Speaking at the inauguration of a new office building of the National Urban Cooperative Finance and Development Corporation (NUCFDC) at the BSE here, Shah also said that when it comes to the safety of money, no other segment is as safe for lenders as small borrowers.

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“I know of your experience till now. RBI looks at you from a particular viewpoint, and UCBs also look at RBI from a different viewpoint. But we have to come out of it,” Shah told the audience comprising executives from over 1,400 UCBs and other stakeholders.

“My five years’ experience as the Union Cooperatives Minister suggests that whenever we have put a step forward with confidence, RBI has proactively helped us,” he added, listing out the relaxations delivered by RBI. Among other aspects, RBI has liberalised branch opening, allowed UCBs to offer doorstep banking, made it possible for them to issue demand drafts and life certificates, and also appointed a dedicated nodal officer just to look into the affairs of the UCBs, which have over Rs 6 lakh crore of deposits, he said.

Shah, who also handles the Home portfolio, said a lot of aspects have been resolved with the help of the RBI, and also welcomed the raising of limits on gold loans and permitting one-time settlements for UCBs. In a statement on developmental and regulatory policy accompanying the bi-monthly policy review announced on Wednesday, RBI Governor Sanjay Malhotra announced a move forward on the ‘on-tap’ licensing of UCBs, which will end a two-decades long pause in the matter.

In the past, instances of lax governance practices at UCBs, which are perceived to be controlled by political heavyweights, have led to instances of some lenders going down, leading to higher systemic caution.

Recalling his experience of chairing a UCB in Gujarat, Shah said the small borrower segment is the safest for lenders and pointed out a scheme of offering Rs 2.5 lakh of loans without any collateral by his bank. He said the management had doubts, but the repayment rate including interest is over 99 per cent under the scheme, and the overall lending offered has been doubled as well.

Shah also announced that NUCFDC, which works as an umbrella body for the sector, will soon be moving its head office to Maharashtra from New Delhi, and added that 449 of such lenders are in the state and 70 per cent of the entities are from Maharashtra, Gujarat, Goa and Karnataka. He said the body has only 690 members as of now, and urged the management to lower membership fees and ensure that all 1,400 UCBs avail the membership.

A lot of advantages will accrue to a lender by joining a grouping like NUCFDC, Shah said, adding that the umbrella organisation can give technical know-how, help with compliances, and offer the best in cyber security solutions. He said a security operations centre has also been opened as part of the efforts, and urged the UCBs to join that as well to deepen the depositors’ faith.

On the issue of scaling up, Shah pointed to the Amul experience of how a string of cooperatives can come together to create a brand with a Rs 1.25 lakh crore turnover now, and added that if India has to become a developed nation as aspired, UCBs will play an important role by supporting the sole proprietors or entrepreneurs in the economy.