Letter to BS: Dual regulation of urban cooperative banks must end

This refers to “SC to hear plea to protect PMC customers tomorrow” (October 17). I feel the system of dual regulation of urban cooperative banks (UCBs) must end. They must be regulated by the central bank. The control of management, administration, personnel by the state/central registrar of societies must end. The central registrar as a government department is too closely linked to the dominant political group/ management and allegedly creates impediments in the smooth functioning of banks. Half-way houses like the proposed board of management will not work. 

Second, it is time that the deposit insurance cover be increased to cover deposits up to Rs10 lakh, with the depositor and the UCB sharing the cost of the increased premiums. Third, the largest UCBs should be legally enabled in due course, to be converted into private banks while the smaller ones become small finance banks. Consistently poorly performing UCBs need to be closed down. Fourth, interest rates on deposits should be related to returns on assets and operational costs.

It is time the interests of depositors, who are often pensioners, salaried persons and small businessmen, are rigorously protected. In the name of cooperative banking, “politically managed”, dilapidated, scam ridden entities should not be allowed to exist. If they call themselves banks and perform functions of banks, they should be fully regulated and supervised as banks.

Arun Pasricha, New Delhi

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