A delegation of the National Federation of Urban Cooperative Banks (NAFCUB), led by its president Jyotindra Mehta, met Union home minister Amit Shah — who recently assumed charge of the newly-formed ministry of cooperation — and submitted him a list of issues pertaining to the cooperative banking sector.
The delegation expressed concern that the non-issuance of new branch licences to UCBs without pre-conditions has severely impacted the sector. Regular approvals for UCBs to open branches were stopped in 2002 following the Mahadevapura Bank episode. The delegation communicated to Shah that lifting this blanket prohibition is pivotal to the growth of the sector.
Emphasising that forced merger of healthy banks is not desirable for grass-roots entities like UCBs, the members said it is crucial to ensure that RBI’s powers of compulsory mergers are used sparingly only in respect of weak cooperative banks that cannot be revived on their own. India has only 1,539 UCBs, which is very small in comparison with its vast population, the delegation said, adding that the finance ministry and the Niti Ayog should consider these facts if they are contemplating consolidation of UCBs.
Highlighting that almost 70% of UCBs are concentrated in Maharashtra, Gujarat and Karnataka, the delegation members urged Shah to consider the need for a policy to encourage and permit the formation of new UCBs in all districts of the country, which will boost the growth of micro-enterprises and generate employment.