What measures can be taken to improve the Urban Cooperative Banks i Fair recruitment ii Independent ...........

Economic and Social Issues Rural Banking and financial institutions

Recently, Reserve Bank of India (RBI) imposed restrictions on withdrawals from the Punjab and Maharashtra Cooperative (PMC) Bank, one of the largest urban cooperative lenders. The bank has been barred from granting, renewing and loans and advances, make any investments and accept fresh deposits, without the prior written approval from the RBI. Bank was put under regulatory restriction for a period of six months due to irregularities like fraudulent loans, excessive lending to Housing Development & Infrastructure Ltd (HDIL) etc. After initially encouraging UCBs to spring up all over India for financial inclusion, the RBI began to wake up to their poor governance from 2005 when it stopped issuing new UCB licenses. Co-operative Banks, which are distinct from commercial banks, were born out of the concept of co-operative credit societies where members from a community group together to extend loans to each other, at favorable terms.Cooperative banks are currently under the dual control of the Registrar of Cooperative Societies and RBI. While the role of registrar of cooperative societies includes incorporation, registration, management, audit, supersession of board and liquidation, RBI is responsible for regulatory functions such maintaining cash reserve and capital adequacy, among others.

What measures can be taken to improve the Urban Cooperative Banks?

i Fair recruitment

ii Independent auditing

iii Strictly adhering to RBI norms

Select the correct answer using the code given below

i. and ii only

ii and iii only

i. and iii only

all of the above

none of these

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Explanation:

Following measures can be taken to improve the Urban Cooperative Banks

•Fair recruitment: In order to improve efficiency, increase transparency and promote fairness, the decision- making processes pertaining to staff administration, granting of credit and new membership should be clearly laid down.

Independent auditing: As suggested by Madhava Rao Committee, audit of UCB should be done by independent external auditors like commercial banks and be inspected likewise.

•Strictly adhering to RBI norms: The foremost duty of the Urban Co-operative Banks is to implement therules and regulations and strictly adhere to the set of rules and regulations framed by the Reserve Bank of India for the healthy growth of their bank as well as the healthy growth of the Urban Co- operative Banking sector.