RBI to set up Expert Committee on Urban co-op Banks

The Reserve Bank of India (RBI) has recently decided to set up an expert committee on Urban Co-operative Banks (UCBs).

Highlights

  • The committee would involve all the stakeholders so as to provide a medium-term road map.
  • The medium-term roadmap in turn will help to strengthen the sector.
  • It will also enable the faster rehabilitation or resolution of UCBs.
  • The committee will also examine other critical aspects related to these entities.

Background

  • The committee is being set in accordance with the provisions of the Banking Regulation (Amendment) Act, 2020. The act became applicable to the Primary or the Urban Co-operative Banks (UCBs) from June 26, 2020.
  • The amendments in the act have brought the equal regulatory and supervisory powers between UCBs and commercial banks.

What are Co-operative Banks?

Co-operative Banks were established on the line of the co-operative credit societies. In such banks, community group provide loans to each other. These banks are different than the commercial banks. The Co-operative Banks further classified into Urban and Rural co-operative banks on the basis of the region in which they are operating.

What are Commercial Banks?

The financial institution which accepts deposits from the general public and give loans to them with the objective of earning profit are called as the commercial banks.

How UCBs and Commercial Banks are different?

The UCBs are partly regulated by the reserve bank of India unlike the commercial banks. The banking operations of the UCBs are though regulated by the RBI to keep a check on their capital adequacy, risk control and the lending norms. But the management & dispute resolution mechanism is regulated by the Registrar of Co-operative Societies. The registrar can regulate it either under the State or Central government. Further, in the commercial bank the shareholders and its borrowers can be clearly differentiated as opposed to the cases of UCBs.

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