Consolidation time for co-operative banks

MID-TERM REVIEW OF ANNUAL POLICY 2004-05/ FINE-TUNING CREDIT DELIVERY

The Reserve Bank of India (RBI) in its mid-term review of the annual policy 2004-05 has encouraged consolidation among urban co-operative banks (UCBs) and regional rural banks for the growth of strong and viable entities in the sector.

A vision document is being evolved on the future role of UCBs, aimed at protecting depositors' interest and avoiding a contagion effect, said the RBI.

Aimed at addressing the structural, regulatory and supervisory issues facing the sector and facilitating the process of formulating future approaches for the co-operative sector, the standing advisory committee on UCBs will meet on a quarterly basis.

The high-powered body is chaired by a RBI deputy governor and comprises members from the central government and select state governments, Indian Bank's Association, the Deposit Insurance and Credit Guarantee Corporation, Nabard and federations of UCBs.

The committee has urged state governments to remove discrimination between RRBs and co-operative banks in matters of stamp duty and mortgage fee.

State governments are also being requested to accord approval of mergers of RRBs within the state, sponsored by the same bank, as and when approached with such proposals.

Sponsor banks are advised to provide support to their RRBs in matters relating to efficient management, training of staff, computerisation and networking of their activities.

For the revival of rural co-operative banks, the government has appointed a task force to propose an action plan and suggest an appropriate regulatory framework for the institutions. The task force is expected to submit its report on October 31.