Meeting compliance norms are crucial

Guidelines have been issued from time to time for banks to keep up with the changing times and bring all banks on the same platform. A provision in the amended Banking Regulation Act brought in January 2020 concerns Supervisory Action Framework to monitor asset quality, profitability and capital/net worth of the banks. How are cooperative banks gearing up to comply with the new realms of compliance and how are the partners supporting these banks?

The discussion was led by Pramod Karnad, former Managing Director at Maharashtra State Cooperative Bank. Other speakers who participated the discussion were Dilip Dighe, General Manager Maharashtra State Cooperative Bank, Pradeep Naik, CEO & Managing Director, Raigad DCC Bank, Vinod Dadlani, CEO & GM, Kalupur Commercial Cooperative Bank, Ahmedabad, Rajendra Bilare, GM, Satara DCC Bank and Suryakant Patil Budhialkar, Ex-Vice Chairman & Sitting Director, Veershaiv Cooperative Bank, Kolhapur. To voice opinions from an IT perspective Head-Presales & Solutions, IDBI Bank, Maheshwar Pathak, joined the discussions.

Pramod Karnad: Post the BRA amendment, do you think there is any great changes in the compliance part for banks?

Vinod Dadlani: Since RBI has been placing stricter regulations, it is time for the banks, especially cooperative

banks, to create a strong compliance culture. Strong accountability for the work they handle has to be placed on the staff. If there are lapses, be it in the digital sphere or the manual, the onus lies on the employee. Every employee should be updated with the regulations so that they are compliance savvy. Doing business with utmost governance and transparency has also to be incorporated into the banking system. Constant and robust inspections will also help. Strong technological support will ensure that processes are adhering to the regulations 100%.

Pramod Karnard: How do you view the new SAF as a tool of regulation by RBI for urban cooperative banks?

Suryakant Patil Budhailkar: RBI expects that the stress points should be identified and corrective measures taken by the banks. The scope and time frame for defaults given are very less. It should be a preventive tool rather than a curative.

Pramod Karnad: Why do you think it is difficult for the cooperative banks to comply with these regulations?

Dilip Dighe: We are trying our best to provide digital services to our customers, which are safe and reliable. Cooperative banks are low in resources, be it the staff, IT infrastructure, or the money that has to be invested in all this. Creating an entity that can be used as a pool for these resources is a suggestion that will benefit many urban and rural cooperative banks.

Pramod Karnad: RBI is a little lenient towards district cooperative banks. If regulations are imposed on them, how are they going to adopt the new norms?

Rajendra Bilare: As much as 50% loan portfolio of district cooperative bank is for the agricultural sector. Every few years, the state and the central governments bring out loan waiver schemes. This has created a mindset for the farmers to not repay the loans immediately. This has become a big burden on DCCBs. While the new regulations are in effect for most of the cooperative banks, we are placing processes and procedures to handle both the needs.

Pramod Karnad: RBI has imposed cash penalties on commercial banks for noncompliance. If such a scenario arises, what should be the action taken by the cooperative banks?

Dilip Dighe: I feel all the banks irrespective of their size should gear up for stricter regulations.

Suryakant Patil Budhailkar :

Sometimes the regulations tie us down in doing our business. Hence, innovative ways have to be thought of so that the rules are followed as well as there is a profitable business.

Pramod Karnad: How do you perceive RBI’s suggestion to change the status from a banking business to a credit society?

Vinod Dadlani: Concerning the punishments imposed on the banks, the regulator has to see the violations in totality. Whether the lapse was unintentional or procedural has to be looked into. Regulations should help to mitigate the damage rather than make it harder for the banks to do business.

Pramod Karnad: As a service partner what help is required through technology to comply with the regulations?

Maheshwar Pathak: Our bank had envisioned the need to comply with the regulations. We have put the digital system in place and it is secure and scalable. Partnering with Asia’s largest data center has allowed us to move to cloud-based computing. We have been helping banks with setting up compliance solutions digitally. Choice of the product or the entire package is up to the client bank. Creating private clouds ensures enhanced security for the bank’s data. Each bank’s needs can be customized.