‘Need able, competent handling of co-op banks’

CHENNAI: The Reserve Bank of India (RBI) on Monday informed the Madras High Court that in the past two decades, the banking licenses of as many as 430 Urban Co-operative Banks have been cancelled. The RBI also said that the Banking Regulation Act was amended primarily to strengthen co-operative banks in the country.

V Suresh Kumar, AGM - Dept of Supervision, RBI, made the submissions to a division bench comprising Chief Justice AP Sahi and Senthilkumar Ramamoorthy. The court was hearing the plea filed by two of the State’s oldest co-operative banks – Big Kancheepuram Co-operative Town Bank Ltd and Velur Co-operative Urban Bank Ltd – that challenged the Ordinance to bring such banks under the RBI ambit.

The RBI, in its reply, said “The impugned sections are fully constitutional and not contrary to, and the Union list under Article 45 is fully competent to pass laws in purview of banking, as substantial members of the public money cannot be left unregulated. Therefore the balance of convenience is not in favour of the petitioners.”

The RBI also cited several instances where such banks in TN had failed in managing public funds. “Theni Urban Co-operative Bank, Madurai Urban Co-operative Bank and Kothagiri Urban Co-operative Bank have all failed over the years with poor financial management and are yet to return depositors’ money as liquidation proceedings have been underway for over a decade,” it said, and added, the very existence of such banks will be at stake in the long run, unless they have an able and competent management.

The court, recording the submissions, adjourned the plea to December 3 for the Centre to submit its report.