RBI panel to monitor Gujarat co-op banks

The Reserve Bank of India has set up a task force to look into the functioning of co-operative banks in the state. An agreement to the effect as inked with Gujarat government on Tuesday.

Besides addressing key issues like urban co-operative banks being subjected to dual control of the RBI and the state governments, the newly constituted Task Force for Co-operative Urban Banks will assess the training and computerisation needs of banks in the state.

It aims to upgrade the human resources and technological infrastructure of these banks to improve their operational efficiency.

This could be seen as the first step of freeing urban co-operative bask from dual control.

Most strong co-operative banks in the state, have been of the view that they must either be governed under RBI guidelines or under the state co-operative department.

The MOU will empower the RBI to have greater say in the day to day functioning of the co-operative banks in Gujarat, said senior co-operative bank's analyst.

The MOU will enable the RBI take action against the management of an co-operative bank, raise corporate governance standards in UCB's by issuance of fit and proper guidelines for members to be eligible for seeking election for the post of director and also appoint auditors, said the analyst.

Gujarat is the second state to sign the MOU after Andhra Pradesh.

There are 359 co-operative banks operating in Gujarat of which 24 are under RBI direction and 14 under liquidation said the RBI report on trend and progress of banking in India 2003-04.

In the mid term review of the annual policy in October 2004, the RBI had announced that a vision document for urban co-operative banks would be released. The report was made public in March this year. Banks have been asked to give suggestions for the document, before it is finalised.

On the issue of dual control over urban co-operative banks, the vision document envisages signing of MoUs between the RBI and state governments to put in place an arrangement through which both have a convergence on the approach and remedial actions are taken to help the co-operative banking sector grow.

The RBI task force for Gujarat will have RBI regional director Vani Sharma as its chairman and state Registrar of Co-operatives J P Gupta as its co-chairman.

The other members will be N S Vishwanathan, chief general manager, UBD, RBI central office, D Krishna, chief executive National Federation for Urban Co-operative Banks (NAFCUB) and Dollar Kotecha, chairman, Gujarat Urban Co-operative Banks' Federation (GUCBF). The first meeting of the task force will be held shortly, a RBI statement said on Tuesday.

State wise distribution of branches shows that around 80 per cent of the urban cooperative banks (UCBs) are concentrated in five states ""- Maharashtra (658), Gujarat (359), Karnataka (321), Andhra Pradesh (169) and Tamil Nadu (136).