6 months too short to get licence,say co-op banks

He said the banks had been functioning without licence for the last 50 years,and in between there had been periodic inspections by the apex bank under the Banking Regulations Act,“but the inspecting teams never found the lacunae”.

“The move is not in the right direction and it is against the interest of the cooperative movement,” Amin said,adding,“Possibly,they are willing to close down small cooperative banks.”

Thanks to frequent changes in RBI norms,Amin said,urban cooperative banks are facing problems. Many are in a weak position,as many farmers hit by flood and drought are not in a position to repay loans. But the RBI has its own line of thinking,he said.

Earlier,after non-payment of instalments for a year,the money was considered as Non-Performing Assets (NPA). Later,the time period was reduced to six months and after that,to three months. Due to such changes,cooperative banks have to earmark more money for NPA and this reflects badly in their Profit and Loss Account. “The loss of cooperative banks is not real,it is created due to the policies of RBI,” Amin said.

Reacting on the development,Gujarat Urban Cooperative Banks Federation chairman Jyotindra Mehta said that cooperative banks did not get licence due to stringent entry norms of RBI,especially after the Madhavpura Bank episode of 2001. Only 11 banks could get licence in the four years after that,he said. Still,some banks are working without a licence. In some cases,banks have no licence but their branches have,he pointed out.

Suggesting a way out,Mehta said member banks should apply for licence on achieving entry norms. “We will seek to condone application delay if the process takes longer,” he said. He said the move is in the interest of the depositors.