The apex body of Urban Cooperative Banks-NAFCUB’s delegation led by its President Jyotindra Mehta met the Union Cooperation Minister Amit Shah at his residence on Saturday and discussed issues related to the Urban Cooperative Banking Sector.
During the meeting, which lasted more than one and a half hours, the Nafcub delegation laid emphasis on achieving the target of Priority Sector Lending (PSL). The issue is becoming a major challenge especially for those UCBs that fall under Tier-2 and Tier 3 categories.
Talking to the Indian Cooperative soon after the meeting, Nafcub President Jyotindra Mehta said, “It was a fruitful meeting with the honourable Union Home and Cooperation Minister Amit Shah. Several issues related to the cooperative banking sector were part of deliberation”.
We raised the issue relating to the RBI notice for UCBs on meeting the target of Priority Sector Lending. “We tried to impress the Minister how hard-pressed UCBs are, on the issue of investment in infrastructure bonds of SIDBI,” said Mehta.
The NAFCUB team comprising Mehta, D Krishna and CE also requested the Minister to help curb RBI’s tendencies of applying small Finance Bank lending norms to UCBs. Mehta had earlier, written a letter to this effect to the govt.
Mehta further added, “We demand modifications in achieving the target for UCBs under PSL from existing 60 percent to 40 percent on the lines of Commercial Banks. The Union Minister listened to our issues patiently and took our views on issues. Let’s hope for some good news sooner than later”, Mehta said.
It is reported that Mehta who hails from Gujarat, was in Delhi for the last three days attending a host of the meetings. He also met the Union Cooperation Secretary Gyanesh Kumar and others for seeking their help to resolve the issues.
According to the figures received at the desk of the Indian Cooperative, “In 2020-21, twenty-two Maharashtra UCBs received the notice from RBI. The shortfall amount in the said year is more than Rs 2000 crore whereas in 2021-22, about 23 Maharashtra based UCBs didn’t not meet the PSL target. The shortfall amount in this year is around Rs 2500 crore.
One of the cooperative banking experts said, “Blocking funds at lowest rates would have severe consequences and effects on the availability of funds for lending, NIM and profitability of banks”.
Many UCBs do not have sufficient liquidity to invest such a huge fund in these infrastructure bonds of SIDBI. In order to meet this shortfall, UCBs will have to raise funds for investment with SIDBI by liquidating SLR securities i.e. Government securities as a distress sale at lower market values by incurring huge losses.