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NAFCUB wants a section in DFS and dedicated deputy governor in RBI for UCBs

NAFCUB wants a section in DFS and dedicated deputy governor in RBI for UCBs

President of the National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB), Jyotindra Mehta, has called on the government to appoint a deputy governor in the RBI specifically for the cooperative banking sector. Mehta has also requested the establishment of a dedicated section within the department of financial services (DFS) to address UCB issues.

According to a NAFCUB memorandum, addressed to FM Nirmala Sitharaman, the cooperation minister has envisioned every urban centre having at least one urban cooperative bank in near future. An exclusive set-up headed by a deputy governor in the RBI will go a long way in providing much-needed support to the entire cooperative banking sector of the country. A standing arrangement of interaction among RBI, the Ministry of Cooperation and DFS is envisaged for improved management/regulation/ development of the cooperative banking sector.

NAFCUB has also asked for restoration of deduction u/s 80P (2) to UCBs that was withdrawn in 2006-07 by introduction of Sec80 (P)(4) as well as restoration of the policy of ‘on tap’ licences for promotion of new UCBs, that was discontinued way back in 2006. Further, there should be an amendment to DICGC Act to help revival/ rehabilitation/merger of stressed UCBs that will mitigate the sufferings of non–insured deposit account holders. The sub-section (4) of section 80P be abolished so that the deduction available u/s 80P (2) prior to A.Y. 2008-09 is restored to UCBs and they are enabled to effectively serve the large strata of the poor population of India who are capable of affording cheap banking with UCBs only as compared to costly banking with nationalised/private banks. Clause xxi be amended to include the words “and a cooperative bank” after “scheduled bank”; and a cooperative bank means a state cooperative bank, a central cooperative bank and a primary cooperative bank, as defined in Sec.5 (as modified by Sec.56(AACS) (cci) of the Banking Regulation Act 1949”. Co-operative societies be treated at par with co-operative banks for this purpose and co-operative credit societies be added in exceptions provided in item (b) of first proviso to section 269SS and exceptions provided in item (ii) of second proviso to section 269T. Section 269ST of Income Tax Act should be made applicable to cooperative credit societies. The societies should be relieved from cumbersome GST compliances and the onus of paying GST should shift to recipient of services whose amounts are very nominal.

A solution is needed where both, the insured and the uninsured depositors of cooperative banks find the same levels of safety as the same categories of depositors of commercial banks. The situation calls for some more reforms in the DICGC role. The inclusion of UCBs in Pradhan Mantri Awas Yojana and in Pradhan Mantri MUDRA Yojana (PMMY) is also requested. NAFCUB has also asked for a suitable amendment to Banking Regulation Act 1949 with regard to RBI directions on the appointment of managing director (MD)/whole-time director (WTD) and terms of directors in UCBs. The Constitution of Appellate Authority by RBI is also argued for hearing cases of imposition of penalties. Cooperative banks should not be corporatized and no scheme for the conversion of strong UCBs to SFBs or private commercial banks be approved. Restrictive policy of issuing licenses to UCBs for opening branches, and aligning it with the policy for commercial banks, should be reviewed by RBI.

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