The Government of India has allowed licensed tier-III and tier-IV primary Urban Co-operative Banks (UCBs), fulfilling the criteria stipulated for financially sound and well-managed UCBs by the Reserve Bank of India (RBI), subject to maintenance of minimum deposits required for categorisation as a tier-III UCB for two consecutive years, to be eligible to be included in Schedule II of the RBI Act 1934 and get ‘Scheduled’ status, a statement from the Ministry of Cooperation said recently.
The decision was taken following a letter written by Union Home Minister Amit Shah to Jyotindra Mehta, President, National Federation of Urban Cooperative Banks and Credit Societies Limited (NAFCUB), on 16th June, 2023.
According to the letter, UCBs can now open their new branches up to 10 per cent (maximum five branches) of the total number of branches without prior approval of RBI, in addition to the existing provision on opening branches through approval route. A Nodal officer has also been nominated in RBI for UCBs for establishing regular communication with the sector.
Further, according to the letter, the Board of Directors of UCBs have now been empowered to formulate their own policy for Compromise Settlements/One Time Settlement (OTS) like that of commercial banks.
In addition, UCBs have been allowed an additional period of two years to achieve Priority Sector Lending (PSL) targets. A time Iimit of 90 days has been fixed for appointment/re-appointment/dismissal of Chairman, Managing Director, CEO and 30 days fixed for appointment/re-appointment/dismissal of auditors, mentioned the letter.
It also stated that UCBs have been permitted to provide door-step banking services to their customers and individual housing loan limits for UCBs have been extended more than two times of the existing permissible limit.
The decision has been taken keeping in mind the vision of ‘Sahakar-se-Samriddhi,’ that aims to strengthen cooperatives by bringing transparency, modernisation, and creating competitiveness.