First Time: RBI engages UCBs’ leaders; Thakur & Chandavarkar attend

In a development which augurs well for urban co-op banks in the country, RBI has begun to engage their leaders by conferring with them on Wednesday. Several eminent co-operators connected to UCBs in the Mumbai region attended the meeting in Mumbai.

All the top three UCBs’ leaders including Saraswat Cooperative Bank Chairman Gautam Thakur, Cosmos Cooperative Bank Vice-Chairman Praveen Kumar Gandhi and SVC Cooperative Bank Chairman Durgesh Chandavarkar were present on this occasion.

According to sources, more than 125 representatives from more than 41 urban cooperative banks were present on the occasion. TJSB Sahakari Bank Chairman Sharad Gangal, MD & CEO Subbalakshmi M. Shirali, NKGSB Bank Chairman Himangee C Nadkarni, Vishweshwar Sahakari Bank Chairman Anil Gadve, Janata Sahakari Bank Pune Chairman Ravindra Balwant Hejib, Pune People’s Cooperative Bank Chairman Subhash Mohite, Apna Sahakari Bank Chairman Board of Management Dattaram Chalke and others were also present.

Inaugurated by the RBI Governor Shaktikanta Das with themes on ‘Governance in Banks – Driving Sustainable Growth and Stability’, the conference was also attended by other RBI officials such as Deputy Governors M. Rajeshwar Rao and Swaminathan J, Executive Directors representing the RBI’s Departments of Supervision, Regulation and Enforcement, and other senior officials.

Acknowledging the role of UCBs in furthering financial inclusion by providing last mile connectivity, the RBI Governor said that while the UCB sector has displayed an improved financial performance at an aggregate level in recent times, concerns and vulnerabilities are seen for certain individual entities.

Das highlighted the need for the UCBs to strengthen their financial and operational resilience so as to contribute to the overall financial and banking sector stability. Deputy Governors M. Rajeshwar Rao and Swaminathan J., along with Executive Directors representing the RBI’s Departments of Supervision, Regulation and Enforcement, and other senior officials, also participated in the Conference.

The Conference was organised to select large UCBs in Mumbai Zone. In a release RBI said it would be convening similar Conferences of Directors on Boards of other Urban Cooperative Banks in other regions of the country. Two separate Conferences were held with Directors on Boards of Public and Private Sector Banks in May 2023, it noted.

Turning to specific expectations from the UCBs, the Governor stressed that the quality of governance was the most important aspect in ensuring stability of individual banks and urged the Directors of UCBs to further strengthen governance practices, especially the three supporting pillars of Compliance, Risk Management, and Internal Audit.

On the functioning of Boards, the Governor emphasized five aspects – adequate skills and expertise of Directors, constitution of a professional Board of Management, diversity and tenure of Board members, transparent and participatory nature of Board discussions, and effective functioning of Board level Committees. He also emphasised on a planned approach towards human resources in UCBs to ensure adequate quality and right size of manpower in them.

The Governor underlined the need for Boards’ involvement in upholding rigorous credit risk management including robust underwriting standards, effective post sanction monitoring, timely recognition and mitigation of incipient stress, rigorous follow up of large NPA borrowers for effective recovery, and maintaining adequate provisioning.

He emphasised that the role of Directors is very significant in ensuring the integrity and transparency of financial statements, and cautioned against the use of innovative accounting practices to camouflage the actual financial position.

The Governor urged the Boards to be more proactive in Asset Liability Management and the necessity of managing liquidity risk in a more systematic manner. He also stressed that the Board’s role is pivotal in establishing a robust IT and cybersecurity infrastructure and availability of requisite skills at the bank level. It was stated by the Governor that the management of the UCBs should enjoy the required autonomy in their functioning.

The Governor concluded that Boards of UCBs can play a pivotal role in navigating change by adapting their bank’s strategy and offerings as suited to the digital age, promoting innovation and embracing change, while retaining the essence of their cooperative culture.

The Conference included addresses by the Deputy Governors and technical sessions on Governance, Business Risks and Cyber Security. The Conference concluded with an open house interaction of the participants with the Executive Directors of the Reserve Bank.

Talking to the Indian Cooperative, one of the participants said, “It was a fruitful meeting; and perhaps it was the first meeting in the history of UCBs where a dialogue between cooperators and RBI took place. During the meeting, the Q&A session was also organized where scores of participants from UCBs raised their queries before the RBI officials including the Governor”.