Amit Shah: RBI has been proactive in helping UCBs

Union Minister of Cooperation Amit Shah on Saturday urged urban cooperative banks (UCBs) to look at the RBI from a "different viewpoint", underlining that the central bank has "proactively helped" the sector in recent times.

Speaking at the inauguration of a new office building of the National Urban Cooperative Finance and Development Corporation (NUCFDC) at the BSE here, Shah also said that when it comes to safety of money, no other segment is as safe for lenders as small borrowers.

"I know of your experience till now. RBI looks at you from a particular viewpoint, and UCBs also look at RBI from a different viewpoint. But we have to come out of it," Shah told the audience, comprising executives from over 1,400 UCBs and other stakeholders.

"My five years' experience as the Union Cooperatives Minister suggests that whenever we have put a step forward with confidence, RBI has proactively helped us," he added, listing out the relaxations delivered by the central bank.

Among other measures, RBI has liberalised branch opening, allowed UCBs to offer doorstep banking, made it possible for them to issue demand drafts and life certificates, and appointed a dedicated nodal officer to look into the affairs of UCBs, which hold over Rs 6 lakh crore in deposits, he said.

Shah, who also holds the Home portfolio, said a lot of issues have been resolved with the RBI's help, and welcomed the raising of limits on gold loans and permission for one-time settlements for UCBs.

In a statement on developmental and regulatory policy accompanying the bi-monthly policy review announced on Wednesday, RBI Governor Sanjay Malhotra announced a move forward on "on-tap" licensing of UCBs, ending a two-decade-long pause on the matter.

In the past, instances of lax governance at UCBs, which are perceived to be controlled by political heavyweights, have led to some lenders going down, prompting greater systemic caution.

Recalling his experience of chairing a UCB in Gujarat, Shah said the small borrower segment is the safest for lenders, citing a scheme offering loans of Rs 2.5 lakh without collateral at his bank. He said the management had doubts initially, but the repayment rate, including interest, is over 99 per cent under the scheme, and overall lending has doubled as well.

Shah also announced that NUCFDC, which serves as an umbrella body for the sector, will soon move its head office to Maharashtra from New Delhi, noting that 449 such lenders are in the state and 70 per cent of entities are from Maharashtra, Gujarat, Goa and Karnataka.

He said the body currently has only 690 members and urged the management to lower membership fees and ensure all 1,400 UCBs avail of it, adding that a lender stands to gain a lot from joining a grouping like NUCFDC, including technical know-how, help with compliance, and the best cyber security solutions.

He said a security operations centre has also been opened as part of the effort, and urged UCBs to join it as well to deepen depositors' faith.

On scaling up, Shah pointed to the example of Amul, where a string of cooperatives came together to build a brand with a turnover of Rs 1.25 lakh crore, adding that UCBs will play an important role in supporting sole proprietors and entrepreneurs if India is to become a developed nation.