Former Union minister and NCP chief Sharad Pawar has slammed the Reserve Bank of India's 'untouchable' approach towards the cooperative banking sector, saying it is based purely on financial and commercial considerations. In a four-page letter to Prime Minister Narendra Modi on August 15, which he released on Twitter late on Tuesday 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 the PMC Bank scam, similar to that of the Madhavpura Cooperative Bank, the Banking Regulation (Amendment) Bill, 2020, was introduced in the Lok Sabha on March 3, 2020, with several amendments to the existing Act as suggested by the RBI ''to end the existence of the cooperative banking sector''. Without any discussion, the bill was converted into an ordinance on June 24, 2020, as Parliament was suspended due to Covid-19.
However, said Pawar, the CBC's share in the overall banking sector is merely 3%. At present, of the 1,544 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 owing to their widespread network of branches over a large geographical area, it is practically impossible for the RBI to conduct inspections of all UCBs every year and therefore, it was insistent on privatising these banks, he said.
''I agree with you that there should be financial discipline in the banks, but it would certainly be incorrect to say that such privatisation of cooperative banks 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 the PMC Bank scam, while during the first half of the year itself, a fraud of approximately Rs 95,700 crore was reported in nationalised banks. ''Therefore, it is not correct to say that misappropriation of funds 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 cooperative banks, Pawar said the gross and net non-performing assets percentage of commercial banks across the country are 9.68% and 5.31% respectively, while those of the UCBs are 7.51% and 2.53% respectively. The provisioning coverage ratio of commercial banks is 46%, while it is 69% for UCBs. ''Of the 1,544 UCBs, only 70 UCBs are in the 'D' category. Therefore it is ridiculous to state that there is no professionalism in cooperative banks. The incident in the PMC Bank is a kind of 'fraud' and the same should not be viewed as a 'business failure' of cooperative banks,'' he opined.
The former minister argued that it would not be proper to say that by converting cooperative banks into private banks, all questions pertaining to the sector will be resolved.
''In fact, it is the need of the hour to create financial awareness among the public and bring financial discipline in the Indian banking sector by making conducive changes to 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 the CBC itself,'' he claimed.
Pawar said the existence of the CBC on its own merits cannot be ignored, considering the history of the cooperative movement and its contribution to the Indian economy. ''I therefore request you to kindly look into the matter personally and give justice to the CBC, which has a more than 100-year-legacy and striving hard not only to exist, but to also grow despite all odds,'' he added.