RBI Governor (Image: x.com/@DasShaktikanta)
RBI governor Shaktikanta Das said that there is a need for the Urban Cooperative Banks (UCB) to strengthen “their financial and operational resilience so as to contribute to the overall financial and banking sector stability.”
He was speaking at an event organised for UCBs by the Central Bank. The Governor, along with the Deputy Governors, M. Rajeshwar Rao and Swaminathan Janakiraman spoke at the event.
The Governor urged the UCBs to adopt a strategy for acquiring good quality of manpower. He touched upon the quality of governance at UCBs, focusing on compliance, risk management and internal audit. On the risks involved while managing credits, the Governor stressed upon the need to maintain strong underwriting standards, effective monitoring of loans, recognising stress on time, ensuring of adequate provisioning and effective recovery mechanisms.
He said that the role of directors “is very significant in ensuring the integrity and transparency of financial statements.” He added a word of caution, as he signaled to be careful about the use of innovative accounting practices in the coverup or hiding of the actual financial status of banks. Similar statements were said in a meeting in May, with the directors of universal banks, reported the bq Prime. These guidelines are significant as the RBI has come across financial irregularities, failure of control systems and under reporting of many financial assets. The Punjab and Maharashtra Co-operative (PMC) Bank’s case in 2019 is one such incident, where later was amalgamated with Unity Small Finance Bank in January 25, 2022, said the Businessline.
Moreover, he said that UCBs boards must take a lead in establishing a strong IT and cyber security infrastructure in order to prevent frauds. Earlier, the CNBC had reported that in the data released by the Department of Financial Services, in the last five years, the Co-operative banks were reported with 4,135 frauds which were worth Rs 10,856.7 crore, said bq Prime.
As per the RBI data of June 14, India has 1,886 co-operative banks, with 1,500 urban co-operative banks and 386 rural cooperative banks. Primarily, the UCB’s extends finance to entrepreneurs, industries, small businesses, self-employment in urban areas, home purchases and educational loans.
