Nabard control: Anaskar writes to Sahakar Bharati to reconsider its stand

Vidyadhar Anaskar, the President of the Maharashtra State UCB Federation has asked Sahakar Bharati to reconsider its decision on the issue of Nabard control of UCBs. He has written a letter addressed to Uday Joshi, National General Secretary of Sahakar Bharati.

Titled “A requisition to Sahakar Bharati to reconsider its decision in the matter “Anaskar requests him to reconsider the Resolution passed by the Sahakar Bharati in its Executive Meeting held on June 7, 2020.

Anaskar has listed his response pointwise as given below:

1.The Maharashtra Urban Co-operative Banks’ Federation had arranged an interview of Hon’ble Shri. Nitinji Gadkari on May 28, 2020 through webex platform. During this interview, various issues affecting the Urban Co-operative Banking Sector were flagged by me, one of which was dual control over UCBs.  Accordingly, I had put forward a suggestion of assigning the role of inspection, supervision, growth and development (as applicable to State Co-operative Banks and District Central Co-operative Banks), of all UCBs in the country to NABARD.  I am fully aware of the fact that this suggestion of mine became a news item only because of the support received from Gadkariji.

2.In fact, this idea is in a very nascent stage. Needless to say that the overall control and regulation of UCBs would remain with the Reserve Bank of India (RBI). However, it should be noted that considering the widespread network of small UCBs in the entire country and lack of full computerisation in the UCB sector, RBI due to shortage of manpower, finds it practically difficult to conduct inspection of all UCBs in the country every year.

To resolve this issue to a certain extent, RBI conducts the annual inspection of ‘A’ & ‘B’ graded Non-Scheduled UCBs once in every two years. However, inspections are actually conducted only after a gap of 9 to 10 months and even in some cases this gap goes beyond 12 to 15 months.

Based on such reports, supervisory actions are initiated by RBI on these banks in the following year.  This creates a lot of confusion and there are examples that many sound and good working banks are adversely affected.

3. Under the provisions of Act, though RBI is empowered to perform regulatory, supervisory and developmental role, it has been observed so far that it is performing only the first two roles, but neglecting the third role i.e. the developmental role.  Therefore, a need is felt to assign the developmental role to an independent institution.

4. On this background, if the task of inspection, supervision and development is handed over to an independent institution like NABARD, RBI would regulate UCBs more effectively and would endeavour for growth and development of the sector.

In order to boost the rural economy, RBI, as per the order of the Government of India, has entrusted the responsibility of conducting statutory inspection and supervision of State Co-operative Banks and District Central Co-operative Banks to NABARD.  The Institutional Development Department of NABARD has been taking several initiatives in association with the Government of India and RBI to make the Co-operative Banks progressive.  Therefore, NABARD being familiar with the functioning of the Co-operative Banks, would be a good supporter to RBI for strengthening the Urban Co-operative Banking Sector.

5. RBI has regulatory control over all licensed financial institutions including Banks.  RBI is also the regulator for NABARD and it would continue to be so.  Section 35(6) of the Banking Regulation Act 1949, empowers NABARD to conduct inspection, supervision and perform developmental roles over State Co-operative Banks and District Central Co-operative Banks. However, punitive action and supervisory restrictions are imposed on such banks by RBI only.

To assign the role of inspection to NABARD on an experimental basis, is as per the provisions of section 35(6) of the Act and there is no need to make any amendment for the same in the Act.

6. In order to overcome the difficulties faced by UCBs, there is no harm in conducting such an experiment that by itself is revolutionary and for the benefit of the sector.

7. The suggestions from the Federation were only related towards divesting the function of Inspection, Supervision and Development of UCBs from RBI to NABARD and not to change the Regulator.

8. Since discussion is considered as a sign of being alive, I would request you to take initiative and ensure to have meaningful discussion on the subject matter. I also request you to endeavour to set up a committee under the chairmanship of authorised person appointed by the Central Government.

9. I am sure that the positive outcome of such meaningful discussions will not only strengthen the Co-operative principle, ‘Co-operation amongst Co-operatives’, but will also give rise to another principle i.e. ‘Unity is Strength’.

10. You are, therefore, requested that after having a detailed deliberation on usefulness of the proposal, its pros and cons, negative aspects, adaptability, legal implications etc. if you find the proposal viable and proper, endeavour to get this proposal approved from the Central Government for the benefit of the Urban Co-operative Banking Sector, since we strongly believe and appreciate that you only have the capability to do so.  I assure you that there may be differences of opinion among the Co-operators but certainly not personal clash of minds.

“Substantiating the above, I request you to reconsider the resolution passed at the Executive Meeting of the Sahakar Bharati held on June 7, 2020”, says Anaskar.