Separate regulator for co-op banks on anvil

New Delhi, March 23 | Updated: Mar 24 2005, 05:36am hrs
The finance ministry is considering setting up a separate regulator for the co-operative banks. There could also be some structural re-organisation of these banks with a view to making them financially stable. At present, the co-operative banks come uder the aegis of the Reserve Bank of India. A consultative committee comprising senior members of Parliament is in favour of having a separate regulator for the co-operative banks.

The central bank has too much on its plate and therefore there is a strong demand to set up a separate regulator to supervise the urban and rural co-operative banks, a senior finance ministry official told FE.

The government is providing a financial package of about Rs 15,000 crore for the rehabilitation exercise of the co-operative banks. State governments too are expected to contribute to the package. However, there are still doubts about their capacity to bear the burden.

The states may not be in any position to shoulder even part of the financial burden to rehabilitate the co-operative banks, he said, adding that the central government would discuss the issue with the state governments.

Meanwhile, it is learnt that the rehabilitation exercise of the co-operative banks would to be taken up in two to three phases over a period of three years. According to the Vaidyanathan Committee report, the co-operative banks need a minimum of Rs 15,000 crore for revival. While a large chunk of the package would be supported by the central government, a part of its cost would also have to be borne by the state governments.

Senior finance ministry officials said that the entire plan would be ready in a couple of months. They also said that the final financial package would be finalised only after consultations with the state governments.