Andhra Pradesh State Cooperative Urban Banks Federation Chairman and Ex-MP Chitturi Ravindra raised many issues including RBI imposing penalty on cooperative banks, during the 46th Annual General Meeting of the federation held recently, said the Federation through a press release.
Enforcement Directorate of Reserve Bank of India imposing penalties, even for small lapse and they are not giving any opportunity to present the submission of UCB’s. RBI is levying penalties on UCB’s continuously, on big or small UCB’s even for some small lapses, reads the release.
It is detrimental to the functioning of UCB’s and affects the confidence of shareholders and depositors. These penalties are levied without any rationality and imposed without any reason. Besides this they are issuing press releases to newspapers and electronic media, which damages the image of banks built up over the years. Levying huge penalties on small banks will affect the sustainability of banks, said the release.
RBI keeps UCB’s under SAF for small lapse without giving opportunity to the concerned UCBs for submitting replies. They are also not considering the submissions and replies of banks even for wrong reporting by the inspector of RBI. RBI authorities are not even reviewing replies submitted by banks about the observations of RBI Inspectors, the release pointed out.
It is against the principle of law of Natural Justice. Hence, we are hereby requesting RBI to evolve a proper mechanism to lift the SAF at the earliest possible time based on the improvement of the performance of a bank, it added.
The urban Cooperative banks are unable to extend housing loans to individuals under the priority sector because of RBI’s regulatory restrictions. RBI has stipulated regulatory restrictions of 15% limit on lending to the housing sector, which includes individual housing loans besides lending to Real Estate and commercial Real Estate (CRE), underlined the release.
Reserve Bank of India implementing the same guidelines for both Commercial Banks and the Urban cooperative Banks. The Commercial Banks are allowed to sanction gold loans under bullet payment without any ceiling. But RBI restricted long back the amount of sanction of gold loans under bullet payment to Rs.2.00Lakhs only for UCB’s. Hence NAFCUB may request the RBI to enhance the bullet payment gold loan limit from Rs.2.00 lakhs to a minimum of Rs.10.00 Lakhs, as the gold loans are secured by liquid gold, read the release.
RBI has restricted the CD ratio to 70%. The reduction of SR from 25% to 18% is for releasing liquidity into the system. UCB’s unable to utilize these funds for lending as the CD ratio is restricted to 70%, it pointed out.
Hence CD ratio may be increased for utilisation of released liquidity or otherwise interbank deposit limit may be increased from 20% to 30%. In the light of the above we request the NAFCUB authorities to bring these matters to the notice of RBI, Central Office, Mumbai for favourable consideration. If necessary you may also bring it to the notice of the central government for necessary action, underlined the release.