The Andhra Pradesh government seems concerned at the mushrooming of urban co-operative banks in the past four years as a result of liberalisation of the Reserve Bank of India (RBI) norms.
It wants immediate action by the central bank to check the growth of these banks as the state can not but register a co-operative bank if ten members subscribe to the capital and follow the rules as per the Co-operative Societies Act.
According to government sources, apart from a handful of co-operative banks established two to three decades back, almost all the new banks require close scrutiny.
There are 161 cooperative banks in Andhra Pradesh, of which 92 are concentrated in and around the twin cities of Hyderabad and Secunderabad. Almost 90 per cent of these banks came into being in the wake of tightening of the functioning of non-banking finance companies in the past three years by the RBI.
In fact, the government has suggested that the cooperative department and the RBI should carry out a quick joint survey of all the co-operative banks. Such a survey should cover the board of directors and their track record, internal controls, policies and procedures, their treasury management capabilities, norms for advances, credit appraisal procedures and deposit mobilisation policies etc. The government feels that most of these banks are headed by former bankers who have little exposure to treasury management.
The state feels that most of these new co-operative banks are functioning purely on commercial lines by passing the cooperative spirit and there was no reason why they should be treated separately compared to the other private banks.
" Why the distinction between co-operative and private banks ? While the private bank has to mobilise a minimum of Rs 100 crore for a license, a co-operative bank can become operational with just Rs 1 crore capital. By today's standard, it is easy for 10 unscrupulous elements to gather together, subscribe each Rs 10 lakh, obtain a license for a cooperative bank and play fraud with depositors' money,
