UCB stakeholders race to meet ₹300 crore capital target by RBI deadline
Key Urban Cooperative bank (UCB) stakeholders, including the Union Ministry of Cooperation and the National Federation of Urban Cooperative Banks and Credit Societies Ltd (NAFCUB), are racing against time to ensure that the umbrella organisation (UO) for UCBs has he required ₹300 crore capital by the Reserve Bank of India’s (RBI) February 7, 2025 deadline.
At a dialogue with government and regulators, organised by the UO—the National Urban Cooperative Finance and Development Corporation Ltd (NUCFDC)—on December 30, Ashish Kumar Bhutani, Secretary, Union Cooperation Ministry, emphasised that it has taken a lot of time and effort to establish the UO, which has been set up as a non-banking financial company.
NUCFDC obtained a certificate of registration (CoR) from RBI on February 8, 2024, after mobilising paid-up capital of ₹117.95 crore. As per RBI approval, the UO will act as a self-regulating organisation.
However, the NUCFDC is required to attain the paid-up capital of ₹300 crore within one year from the date of CoR. The National Cooperative Development Corporation (NCDC) has committed to investing 20 per cent (or ₹60 crore) in the UO’s paid-up capital.
Cut-off date
Bhutani said:“ Now, the issue is we have to show the equity of ₹300 crore before the cut-off date …Commitments are there, but money has not come in…The top 30-40 UCBs should take on themselves the responsibility of setting up this organisation.
“All banks should participate sooner or later and contribute whatever they can. And I am requesting all the Tier-3 (with deposits more than ₹1,000 crore and up to ₹10,000 crore) and Tier-4 (with deposits more than ₹10,000 crore) banks to contribute the fair share of money…My request to all bank Chairmen and CEOs is go back to your respective boards, raise this issue.”
The NUCFDC has been floated to support the UCB sector, which is facing stiff competition from public sector banks, private sector banks, small finance banks and non-banking finance companies. During FY24, the consolidated balance sheet of UCBs exhibited a muted growth of 4 per cent, albeit higher than 2.3 per cent in the previous year, per RBI’s latest Report on Trend and Progress of Banking in India.
The balance sheet size of UCBs relative to Scheculed Commercial Banks fell for the seventh successive year to 2.5 per cent at end-March 2024 from 3.8 per cent at end-March 2017, dragged down by subdued deposit growth on the liabilities side and loans on the asset side, according to RBI.
Jyotindra Mehta, Director, NAFCUB & Chairman, Gujarat Urban Cooperative Banks Federation Ltd., noted that larger and mid-sized UCBs could consider contributing 0.15 per cent of their total deposits. Smaller UCBs may contribute a minimum of Rs 10 lakh.
Mehta said large UCBs such as Saraswat Cooperative Bank, Cosmos Bank, SVC Bank, TJSB, Kalupur Commercial Cooperative Bank and Rajkot Nagrik Sahakari Bank have invested in NUCFDC’s capital.
The UO’s fund-based support activities for UCBs will include providing capital and secured credit lines to help tide over temporary liquidity mismatches, refinance against their loans, and emergency liquidity support during difficult times, among others,
Its non-fund based activities will include creating a shared IT (Information Technology) platform and support to the sector and an array of IT products and services; treasury management services; ayment and settlement services and credit card services; capacity building though training and consultancy services in operational areas and HR support services to banks in the sphere of search of directors, KMPs (key managerial personnel) and staff.