RAMKRISHNAPUR AND KASUNDIA CO-OPERATIVE BANKS- SAGA OF CONTINUED STRUGGLE BY EMPLOYEES AND CUSTOMERS- shyamaprasad battacharjee, 3rd part LAST PART WOULD FOLLOW MAJOR POLICY CHANGES POSE SERIOUS CHALENGES TO UCBS Economic reforms introduced in India in 1991 had given a wide dimension in functioning of UCBs. Certain privileges like higher interest rate on deposits, concessions in lower percentage of SLR, CRR, refinance facility from RBI, tax exemption, issue of microcredit have been taken away one by one. The major policy development of UCBs has been effective from the year1992-93, i.e. post prudential norms era. The sudden changes in the policy concerning the operations of UCBs have direct and indirect implications on their performance. The terrain of operation of UCBs has been opened to commercial banks, microfinance institutions etc .subjecting them to a highly competitive market with other mighty players. The RBI introduced income recognition and asset classification norms for UCBs in 1993. In terms of this revised norms, income from NPAs could not be taken to P&L account unless income is realized. Two aspects of accounting norms assume greater significance; one relates to capital adequacy another to provisioning. The further norms for the ratio of capital to risk weighted assets (CRAR) have been introduced in a phased manner from 31st march 2002. The ability to raise capital to meet CRAR is limited. The shares of UCBs are not quoted in the stock market nor are these banks are allowed to raise capital in the market. Members’ shareholding is linked to the loan amounts and can be withdrawn once the loans are repaid. Members can redeem their shares in the capital resulting in fluctuating in the size of capital. Managing this aspect is a challenge. The norms of grading UCBs as weak and sick were modified in the year 2003. The UCBs are classified into 4 grades namely grade I, II, III and IV WEF 12/05/2003 on the basis of capital adequacy, asset quality, earnings, compliance of CRR/SLR and adherence to RBI guide lines. A system of supervisory rating for UCBs, under capital adequacy, asset quality management, earnings liquidity in systems (CAMELS) model has been introduced by RBI. In order to ensure adherence prudential standard by UCBs, the regulator’s frequency of interventions increased, thereby affecting cooperative character, RBI intervention has indirectly infringed upon the functional autonomy covering areas like credit, investment, and deposit , authorities of state govt , over all would dilute the principles of co-operative movements in India. RBI prepared a vision documents in the year 2005. The main features are: - 1) rationalizing and supervisory approach 2) enhancing professionalism and improving quality of governance 3) identifying weak and potentially viable entities in the sector for strengthening through a process of consolidation and 4)identifying the unviable entities and providing exit path for such entities. The vision document mainly lays stress on the role of RBI as a regulator. The RBI seeks more power to exercise and tighten supervisory regime on UCBs. Prescription for amalgamation and merger, exit of weak bank from system is made without evaluating impacts caused through policy changes through reforms. RBI proposed, “As per provisions of the State Cooperative Societies Act as also the BR Act 1949 (AACS), the Reserve Bank is not empowered to take action against the management of an urban cooperative bank, in case of need, as in respect of commercial banks. It may be useful to have a working arrangement in the form of Memorandum of Understanding (MOU) between the RBI and the State Government/CRCS to ensure that the difficulties caused by dual control are suitably addressed through such MOU/s. The State Governments may, through the MOU, agree to take immediate action on requisitions of RBI for supersession of the Board of Directors, appointment of liquidators, initiating action for removal of CEO/Chairman of a bank, enhancing quality of HR and IT resources in the banks on the lines required by RBI.”(4). RBI seems unconcerned to study, if at all, such changes in policy are necessary. UCBs’ PROBLEMS IN CHANGED ENVIRONMENT To face challenges in the changed policy regime, shortcomings come in the ways:- a) high cost deposits b)lack of skilling and re-skilling of staff in a well devised plan c)low level of IT implementation compared to others entities in the same market d) high interest rate on advances f) denial of income from other sources g)absence of professional managements, the state govt on many occasions dissolve the elected board and depute government official having not adequate expertise in banking, g)absence of human resource management h)lack of technology based products . UCBS will be required to augment capital base even for their operation. DEVELOPMENTS IN OUR STATE The MOU with RBI had been signed in year 2008 and TAFCUB has been constituted. CBEF had submitted a memorandum to TUFCUB. Our state has 8 loss making UCBs. The expert committee WITH 3 MEMBERS constituted under chairmanship of SHRI ASHOK Bandyopadhyaya. The committee evaluated different parameters of UCBs very meticulously and recommended the policy for vibrant, strong UCBs to reflect true values of co-operative movements in our state. All measures were taken by LF govt. COMMENDABLE ROLE OF LEFT FRONT GOVT ON UCBs As suggested, the Govt. of West Bengal(LF) had decided to infuse capital in the form of Equity (vide G.O.No. – 708 (Sanction) Coop-/D/3P-5/2010 pt. dt. 31.03.2010; G.O. No. -117 (Sanction) Coop/D/3P-5/2010 pt. dt. 17.06.2010 and G.O. No. – 265 (Sanction) Coop/D/3P-5/2010 pt. dt. 10.09.2010) amounting to Rs.58.29 Crores to 8 (eight) Urban Cooperative Banks. In terms of conditions of MOU between GOVT. OF WB and RBI, capital infusion in the form of equity participation by the Govt. of West Bengal was sought to be in made in phased manner to The Bantra Cooperative Bank Ltd., The Bally Cooperative Bank Ltd., Kasundia Cooperative Bank Ltd., The Boral Cooperative Bank Ltd., Suri Friends Cooperative Bank Ltd., Ramkrishnapur Cooperative Bank Ltd., Panihati Cooperative Bank Ltd. and Rahuta Union Cooperative Bank Ltd, having negative net worth so as to overcome the situation, accordingly a part was released barring one or two. POLICIES OF PRESENT STATE GOVT DEEPEN CRISIS The present govt after coming into power in June 2011, started initiating policies of superseding different boards of UCBs, reduced the tenure of elected board. Pronouncements are made to encourage defaulters not to pay their dues to the bank. The policy for capital infusion has been pushed to back seat. The democratic set up based on elected members of boards to take decision reflecting aspirations and need of the locality was replaced by burocratic set up. The decision for liquidation of week UCBS without making efforts for survival is order of the day. The crisis has deepened in many UCBs in absence of positive steps by the govt. the whole scenario presents a dismal picture. The sufferings for small depositors are un depict able, tiny borrowers suffer for not getting loans, employees are losing their jobs, some time remain unpaid for months together. The co-operative movements through UCBs ARE UNDER SEIZE by both the govts , state and central. The left front GOVT. had set an example in saving the UCBs in the circumstances when the policy of central govt is to curb the role of intermediation of UCBs in banking sector. In the name of exit , weak and sick ucbs are to be liquidated throwing into winds of the interests of members, small depositors beneficiaries of tiny credits etc. When govt is providing funds to some of commercial banks to tide over problems, arising out of huge accumulation of NPAs, no such proposal is for UCBs, on the contrary restrictions are imposed on carrying out their business resulting in their conditions moving from bad to worse .the govt released huge funds to write off NPAs. But at same time UCBs got punishment for their default. In what way will the attitude help balanced growth of financial system as a whole? , a generalization of distress across all common section of people is on the horizon. This should, however, provide the basis for intensified struggle to un mask the present policy to present an alternative, more egalitarian and more humane policies for development than the current neoliberal one. Trade union and democratic movements jointly address the issues without delay Trade Unions must raise demand for release of promised funds to the concerned co-operatives and withdrawal of embargo by RBI on concerned UCBS TO ALLOW THEM TO CARRY OUT NORMAL BUSINESS TO TIDE OVER CRITICAL SITUATION. ACKNOWLEDGEMENTS 1)FRONTLINE- Volume 29 - Issue 19 :: Sep. 22-Oct. 05, 2012 2)Brief History of Urban Cooperative Banks in India , RBI 3) Anand Sinha, Deputy Governor, Reserve Bank of India , lecture delivered on 06/01/2011, RBI WEBSITE 4)VISION DOCUMENT-RBI
Posted on: Tue, 13 Jan 2015 02:29:53 +0000
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