No New UCB Licences Before Regulatory Regime Is In Place

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Mumbai, May 18: The RBI has said that fresh licences will be issued to urban co-operative banks (UCBs) only after a comprehensive policy on UCBs including an appropriate legal and regulatory framework for the sector is put in place, and a policy for improving the financial health of the urban co-operative banking sector is formulated easily.

This is an endeavour by the RBI to provide security to depositors as well as bridge the financing gaps for small scale investors (SSIs), small and medium-sized enterprises (SMEs) and small borrowers.

“We will consider only such schemes of reconstruction which envisage re-capitalisation by the stakeholders, including shareholders, co-operative institutions and the government,” said Dr Reddy in the annual policy statement.

The re-capitalisation would be to the extent of achieving the prescribed capital adequacy norms without infusion of liquidity through settlement of insurance claims by DICGC.

“This also includes schemes which lay a clear road map for reducing the NPA level to tolerable limits within a stipulated time frame,” he said.

The NPAs of UCBs increased from 11.8 per cent of their total advances in the fiscal 1997-98 to 21 per cent by FY 2003.

By the end of calender year 2003, out of 2,104 UCBs, 176 were under liquidation and 636 had turned weak or declared sick.