Won’t allow ‘second grade citizen’ treatment on cooperative sector, assures Amit Shah

Asserting that cooperative model  holds relevance for India even today, the Home and Cooperation Minister Amit Shah on Thursday assured the cooperative banks and credit societies  that government would not allow any ‘second grade citizen’ treatment to them when it comes to RBI norms or other government policies under the recently amended Banking Regulation Act.

“I can assure that no second grade citizen treatment would be meted out to you. At the same time, special favours are also not going to be given,” Shah said at a National Conclave of Scheduled & Multi State Urban Cooperative Banks and Credit Societies on ‘Future Role of Urban Cooperative Credit Sector’ in the capital. The conclave was organised by National Federation of Urban Cooperative Banks and Credit Societies Ltd (NAFCUB).

 This assurance from Shah came as music to the ears of urban cooperative banks (UCBs) and credit societies who have been crying foul over the absence of level playing field with commercial banks post the breakout of the Madhavpura Mercantile scam in 2001. 

“The Minister’s remarks today gives lot of comfort to us. Because of the Minister’s intervention,  some liberty has been given by RBI recently in terms of 100 per cent housing finance loan. Earlier housing finance limit was about ₹35 lakh, but recently it has been doubled for certain cooperative banks,” Jyotindra Mehta, President, NAFCUB told BusinessLine.

The UCBs had brought to the attention of the government that RBI had stopped extending branch licences to any of the cooperative banks for over a decade since 2001. The RBI decision not to award branch licences between 2022 and 2012 to any of the cooperatives were hampering the growth of the cooperative sector, they had contended.

“There was a big obstacle from the regulator that they were not giving branch licences to us. But they were giving licences to other players. Commercial banks have automatic route but we don’t have. Our demand was there must be level playing field. RBI was giving on tap licences for others like small finance banks but it is not there for cooperative banks,” Mehta pointed out.

As regards Banking Regulation Act, the Centre had recently amended this law to bring the cooperative banking sector into the mainstream of banking industry in India. With this amendment, UCBs are expected to get more freedom  in their operations which they have been asking for and at the same time they will be under stricter regulatory regime.

Hire new age banking experts

Meanwhile, Shah urged the cooperative banks and credit societies to be in tune with the times and open up themselves to hiring  new age young professional bankers.  “You need experts to manage the surplus that you generate from your operations. You must bring new age banking experts and professionals within your fold and improve your corporate governance. That will also enhance the trust of the regulator and the society on you,” Shah added.

The Minister suggested 4Ts —Trained banking experts, Technology, Transparency and Trust — as the mantra for cooperative banks success in the future.

Shah also said the cooperative banks and credit societies must strive to enhance people trust in them. He stressed the need to take forward the cooperative movement in the country and highlighted successes such as AMUL. Shah also wanted UCBs to enhance their market share and pointed out that their share in deposits and advances of the financial system was still quite minuscule at 3.25 per cent and 2.69 per cent, respectively. 

Umbrella organisation

Mehta said that a new umbrella organisation for UCBs, National Cooperative Finance Development Corporation (NCFDC) has been set up with the blessings of the RBI and will function as a self-regulatory organisation. 

As a sector under NCFDC , the UCBs with their 11,500 branches would be among the top five banking entities in the country, Mehta added.