The federation of urban cooperative banks (UCBs) on Monday rejected the Reserve Bank of India's recent report on them, saying that its recommendations would adversely impact their growth.
National Federation of Urban Co-operative Banks and Co-operative Credit Societies' (NAFCUB) chairman Mukund Abhyankar told reporters here that the federations's general body has already passed a resolution to reject the recommendations of the RBI panel specifically relating to conversion of urban cooperative banks into joint stock companies.
"RBI, instead of addressing our concerns and issues, is following a policy to shrink the urban cooperative sector by proposing conversion into commercial banks, which can not be accepted," he said.
"The cooperative sector is very important for financial inclusion and growth of the nation. This report is not in the interest of the cooperative sector. Therefore, any move against the cooperative movement will be opposed," he added.
RBI had set up a committee on the UCB system, chaired by Deputy Governor R.Gandhi, which last month, recommended the government amend the laws to allow grant of a commercial bank licence to these entities.
The panel has suggested amendments to the law to allow urban cooperative banks to exit from the ambit of the Multi State Co-operative Societies Act and come under the Companies Act.
Currently, the Banking Regulation Act governing commercial banks does not fully apply to cooperative banks, which means that all RBI norms are not applicable to these entities.
The recommendation to grant commercial banking licences to UCBs comes as the RBI has decided to issue niche bank licences, and has invited applicants in the payments bank and small finance bank segment.
As per the central bank's data, the capital adequacy ratio of UCBs at March-end was 12.6 percent, as compared to the regulatory requirement of nine percent.
Abhyankar also said that every UCB will pass a resolution against the committee's report and submit that the recommendations be scrapped.
