Page 17 - Banking Finance May 2022

CO-OPERATIVE BANK NEWS

Co-Operative Bank

News

Rural Co-op Banks al- be brought under uniform regulations RBI imposes penalties
along with co-operative banks and
lowed to raise more funds even public sector banks, according to on 3 Co-Operative banks

The Reserve Bank of India has allowed a report by the economists at State RBI has imposed penalties
Rural Cooperative Banks (RCBs) to raise Bank of India. It also said that several totalingR.5 lakh on three coopera-
funds from people in their area of op- regulations for RRBs need to keep tive banks for various non compli-
eration or existing shareholders abreast with changing times and need ances.
through a variety of instruments. to be updated.
A penalty of Rs.2 lakh has been im-
RCBs, which include state co-operative "We believe it might be better to posed on The Yashwant Cooperative
banks and district central co-operative clearly separate the outcome-based Bank Limited, Phaltan for contra-
banks, can raise funds from preference regulation from rule-based regulation" vention of non-compliance with di-
shares and debt instruments, RBI said report titled "The fallacy of using out- rections issued by it on Income Rec-
in a notification. come based intervention as a yardstick ognition, Asset Classification, Provi-
RBI said the review is being done fol- for rule based regulatory intervention sioning and other related Matters,
lowing the rural co-operative banks in Regional Rural Banks - Key Issues & the RBI said in a statement.
coming under the ambit of the Recommendations" said.
In another statement, the central
amended Banking Regulation Act. The RRBs are at present subjected to bank said a penalty of Rs 2 lakh has
Such lenders can augment their capital a hybrid regulation: a combination of been imposed on Kokan Mercantile
through the issue of preference shares, using specific outcomes to mandate Co-operative Bank Ltd., Mumbai for
which can include issue of perpetual rule-based regulations. This may have similar non-compliance.
non-cumulative preference shares queered the pitch for RRBs in terms of The RBI has also imposed a penalty
which will be eligible for inclusion in core performance indicators. " We believe of Rs 1 lakh on the Samata Coopera-
tier I capital. Besides, tier-II capital in- it might thus be better to clearly sepa- tive Development Bank Limited,
struments, including perpetual cumula- rate the outcome-based regulation Kolkata, for contravention of direc-
tive preference shares, redeemable from rule-based regulation" the report tions issued by it on 'Exposure Norms
non-cumulative preference shares and said. In a rule based regulatory frame- & Statutory/Other Restrictions-
redeemable cumulative preference work, the regulator sets rules that UCBs', the RBI said in a separate
shares can also be utilised. needs to be adhered to by regulated filing.
entities. The rules in themselves aim to
"force" a specific outcome.
RRBs need uniform regula-
In an outcome based regulatory frame- level outcomes that need to be
tions work, there is a clear move away from achieved. An outcome-based regula-
Regional Rural Banks (RRBs) need to adherence to prescriptive rules to high tion eliminates one size fits all ap-

BANKING FINANCE | MAY | 2022 | 17