Sunday, January 16 2022
Mumbai: An RBI panel suggested accelerating the creation of an umbrella organization to enable small urban cooperative banks (UCBs) to scale up by being part of a network. The panel also said the RBI should use the compulsory mergers route to resolve problematic co-ops and be neutral on voluntary mergers.
The panel also called for changes to the Banking Regulation Act allowing the RBI to report securities issued by UCBs as covered by the Securities Contract Regulation Act to facilitate their listing on the stock exchange.
These recommendations were made by the Expert Committee on Primary (Urban) Cooperative Banks under the chairmanship of former RBI Deputy Governor NS Vishwanathan. The RBI formed the panel in February to address issues relating to the regulation of cooperatives.
The panel suggested a four-tier regulatory structure for UCBs. The level of regulation would depend on the size of their deposits and the capital requirement and regulatory standards would become strict with size.
Level 1 would include banks with deposits up to Rs 100 crore, level 2 with deposits between Rs 100 crore and Rs 1,000 crore, level 3 between Rs 1,000 crore and Rs 10,000 crore, and level 4 with deposits of over Rs 10,000 crore. The capital adequacy ratio of these banks would be between 9% and 15%, while Tier 4 banks with deposits above Rs 10,000 crore would face the same standards as regular commercial banks. Besides capital, the extent of loans they can offer in different categories, such as gold and home loans, would depend on their size.

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