Ahmedabad: Twenty-two years after Reserve Bank of India halted fresh licences for new urban co-operative banks following the Madhavpura Mercantile Cooperative Bank (MMCB) scam, Gujarat could see new entrants in the sector with the central bank’s proposed licensing relaxations.The 2004 ban was imposed after the MMCB crisis, in which depositors lost savings estimated at more than Rs 1,000 crore. With the RBI now proposing to ease norms for fresh licences, four to six co-operative credit societies in Gujarat are expected to seek to start urban co-operative banks (UCBs).“At least four to six new UCBs are likely to come up across Gujarat when the Reserve Bank of India’s proposed licensing relaxation takes effect. The proposed framework could create a long-term pipeline for new licences and widen opportunities for eligible cooperative credit societies. This has become possible only because of the positive initiative taken by the Union Cooperation Ministry,” said Jyotindra Mehta, national chairman, FUCBCS.Mehta said that after the MMCB scam, no UCB across India received a licence in the past two decades. Gujarat currently has 204 urban cooperative banks operating at least 1,200 branches. Nationally, there are 1,437 urban co-operative banks with more than 11,000 branches.Under the RBI’s draft framework, a cooperative credit society applying for a banking licence must have been in operation for at least 10 years, have minimum deposits of Rs 10,000 crore and a net worth of at least Rs 300 crore, and be registered under the Multi-State Cooperative Societies Act, 2002.The applicant must show positive financial performance with progressive improvement over the preceding five years. Its capital-to-risk weighted assets ratio (CRAR) as on March 31 of the year of application must be at least 12%.“The draft norms also seek to prevent concentration of ownership. No member can hold more than 5% of the share capital. The board of directors must also have a good track record,” said Mehta.Co-operative bankers said the proposed norms are aimed at strengthening the co-operative banking ecosystem. “Strong co-operative societies will get a chance to grow as UCBs. Strict licencing crietrias will ensure people’s money remains safe,” said a director of a co-operative bank requesting anonymity.
