RBI to review co-op bank regime
Mumbai: Reserve Bank of India (RBI) governor Shaktikanta Das has said that the central bank will review the regulatory framework for co-operative banks and will discuss with the government if any changes are required. The governor’s statement was in light of the Rs 4,355-crore Punjab and Maharashtra Co-operative (PMC) Bank fraud, which has resulted in the RBI freezing deposits of lakhs of customers.
In his post-policy interaction, Das said that one incident should not be used to generalise the health of the co-operative banking sector. “I want to reiterate that the Indian banking sector remains sound and stable. And there is no reason for any panic. In fact, sometimes rumours can create a panic situation. I would like to appeal to all members of the public not to believe in such remarks,” said Das.
Stating that the RBI would not allow a co-operative bank to collapse, Das said that cooperatives develop their own problems because of so many factors. “Every such incident is an experience. Based on this experience, we take a fresh look at the regulatory framework that is in existence, and if any changes are required, we will take it up with the government,” said Das.
According to the governor, the RBI did not take the forced merger route for PMC Bank as every case was unique. Co-operative banks have been a regulatory challenge for the central bank given the dual-regulation structure under both the RBI and state governments. The RBI had earlier given an option to co-operative banks to convert into small finance banks, which would bring them out of the dual-regulation structure and be monitored by just the RBI.
“No co-operative bank has come forward. Given the nature of co-operative banks — they have members, not shareholders — there are legal issues. Based on our internal review, we will take up with the government whatever changes are required to be undertaken,” said Das.
Das said that while he could not discuss RBI action on an individual bank, he said that all aspects of PMC Bank issue were being looked into. Defending the RBI move to place restrictions on operations, Das said that the central bank had acted swiftly and its actions were in keeping with the circumstances of the case. He added that because a merger worked in one particular case, it need not be used to resolve every one.