Co-op banks seek penalty waiver

Urban cooperative banks (UCBs) of south Gujarat have sought a waiver of penalty imposed by the Reserve Bank for their failure to meet statutory liquidity ratio (SLR) requirements.

They have urged the apex bank to take a lenient stand in view of the crisis in the co-operative banking sector.

"If due to some reason, a co-operative bank is unable to maintain the minimum SLR, RBI imposes heavy penalties on it. Considering the critical phase the co-operative banking sector is passing through, we have requested the RBI to waive this penalty for the time being," an office bearer of the South Gujarat Urban Co-operative Banks Association said after Friday's meeting with high-ranking RBI officials in Ahmedabad.

"The RBI officials have assured us that they will consider our suggestions and demands sympathetically," he added.

"The co-operative banking sector Gujarat, especially Surat is passing through a tough phase. The situation is slowly improving, but it could go out of hand if RBI tries to enforce all norms strictly. We have requested the apex bank to give certain relaxations to the co-operative banks for the time being," the association's office bearer said.

The issue of Home Trade scam-affected banks also figured in the meeting.

"Several co-operative banks of Surat and south Gujarat lost money in to the Home Trade scam. Since the three-year period has expired, the RBI has asked the banks to make 100 per cent provision for this amount. If the provision is made now, the banks' net worth would become negative and they would collapse," the association member said.

"The Home Trade scam is sub-judice. Though little, the affected banks still have a hope of recovering money from Home Trade. If provision is made after this amount is recovered, it might not cause that many problems to the banks. We have requested the RBI to extend the time-frame for making the provision," he said.

The bankers also sought certain changes in SLR norms. "The RBI has recently made it mandatory for all co-operative banks to invest 25 per cent of their total deposits in government securities. The deposits of a local co-operative bank in The Surat District Co-operative Bank are calculated in the SLR but their deposits in a nationalised bank are not considered. We have urged the RBI to change this rule so that the deposits of co-operative banks in a nationalised bank should also be included in the SLR," the association member said.