Sharad Pawar
Sharad Pawar

Mumbai: Former union minister and NCP chief Sharad Pawar has slammed the Reserve Bank of India's ''untouchable'' approach towards the Cooperative Banking Sector (CBC) with a legacy of more than 100 years saying that it was based purely on financial and commercial considerations.

In a four page letter to Prime Minister Narendra Modi on August 15, which he released late evening on Tuesday on Twitter, Pawar claimed that the RBI since 1993 has been trying to convert urban cooperative banks (UCBs) into private banks by setting up various committees and issuing circulars from time to time to implement their recommendations but could not succeed.

Pawar said in the wake of PMC Bank's fallout due to scam similar to that of the Madhavpura Cooperative Bank, the Banking Regulation (Amendment) Bill, 2020 was introduced in Lok Sabha on March 3, 2020 by making several amendments in the existing Act as suggested by the RBI ''to end the existence of Cooperative Banking Sector.'' The Bill was converted into an Ordinance on June 24,2020 as the Parliament was suspended due to COVID-19 and therefore without any discussion.

However, Pawar said the CBC's share in the overall banking sector is merely 3%. At present, out of 1544 UCBs in the country, around 897 UCBs have a deposit base of less than Rs 100 crore and115 UCBs with less than Rs 10 crore. Since these banks do not have the latest technology and due to widespread network of their branches over a large geographical area, it is practically impossible for the RBI to conduct inspection of all UCBs every year and therefore it was insisting for conversion of these banks into private banks.

''I agree with you that there should be financial discipline in the banks, but certainly it would be incorrect to say that such conversion of CBC into private sector would completely or partially prevent misappropriation of funds,financial irregularities and frauds in the banking sector,'' said Pawar. Referring to the RBI data, he said that the amount involved in the fraudulent transactions occurred in nationalised banks was approximately Rs 95,700 crore of which the amount involved in State Bank of India alone was Rs 25,400 crore.

According to Pawar, in the financial year 2019-20, an alleged fraud of Rs 4,355 crore was identified in PMC Bank's scam, while during the first half year itself a fraud of approximately Rs 95,700 crore was reported in the nationalised banks. ''Therefore, it is not correct to say that misappropriation of fund or financial irregularities are observed in cooperative banks only. Further, it seems absurd to claim that privatisation of cooperative banks would curb or reduce banking frauds,'' he noted.

On RBI's frequent allegation of lack of professionalism in the cooperative banks, Pawar said the gross and net non-performing asset percentage of commercial banks across the country are 9.68% and 5.31% respectively, while that of UCBs are 7.51% and 2.53% respectively. The provisioning coverage ratio of commercial banks is 46% while it is 69% of UCBs. ''Out of 1544 UCBs, only 70 UCBs are in the ‘‘D’’ category. Therefore it is ridiculous to state that there is no professionalism in cooperative banks. The incidence occurred in PMC Bank is a kind of ''fraud'' and the same should not be viewed as a ''business failure'' of cooperative banks,'' he opined.

Former minister argued that it would not be proper to say that by conversion of cooperative banks into private banks all the questions pertaining to the sector will be resolved. '' In fact,it is a need of an hour to create financial awareness among the p[ublic and bring financial discipline in the Indian Banking Sector by making conducive changes in the provisions of the Banking Regulation Act. Unfortunately, efforts are made to abolish the CBC by introducing provisions that are detrimental to the existence of CBC itself,'' he claimed.

Pawar said the existence of the CBC on its own merits cannot be ignored considering the history of cooperative movement and its contribution towards the Indian economy. ''I therefore request you to kindly look into the matter personally and give justice to the CBC having a legacy of more than 100 years and striving hard not only to exist but also to grow despite all odds,'' he added.

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